IABD project – Latin American Research Network

Recent research in economics has associated the discovery of new tradable industries with high growth episodes. It has been argued that larger economies export more thanks to a higher variety of goods exported, and that richer countries export more thanks to the increase in the quality of exports. Moreover, there is robust evidence that for low-to middle-income countries, economic growth entails diversification rather than specialization. In consequence the process of coming up with new varieties or higherquality versions of old varieties of exports -the process of discovery- is crucial for export growth and it is necessary to understand it better. This research makes part of a larger initiative lead by the IADB Research Network to explore export discovery and diffusion processes through an in-depth revision of particular cases of successful emergence of export activities. We revise four cases of export success in Colombia, three of which emerged during the nineties -underwear, confectionery products, paper sanitary products- and one in the late sixties -fresh cut flowers. In each of these cases we analyze how different discovery processes took place, the nature of the discovery and the events that triggered it. We also explore how first movers managed to overcome uncertainties they faced -particularly the incomplete appropriability of rents - as well as coordination problems that arose in the initial stages. We also review the diffusion process that followed discovery, highlighting its speed and intensity, the nature of externalities enjoyed by followers, the mechanisms through which diffusion happened, and the costs or benefits for incumbents and for export success as a whole. We finally evaluate the role played by the government in the discovery process, not only in providing adequate conditions and supportive initiatives for exporting, but also in helping exporters to overcome market failures and resolve coordination problems. This study is divided into six chapters. Following the introduction, the second chapter presents the theoretical framework and discusses the concepts of discovery and diffusion, the third chapter reviews Colombian export activity and the environment for exporting, the fourth chapter lays out the criteria used in sector selection, the fifth chapter contains the four case studies, and the sixth chapter presents the lessons that can be gathered from the case studies as well as our policy recommendations.