The internet and Chinese exports in the pre-ali baba era

Abstract

The dramatic expansion of internet access in China allows us to analyze the impact of the internet on firm performance. Combining firm-level production data with province-level information on internet penetration, we examine how the internet rollout across Chinese provinces in 1999–2007 influenced firm export behavior. We show that the internet rollout boosted firm manufacturing exports, even before the rise of major e-commerce platforms. We take a closer look at why, addressing three questions: what aspects of firm performance were affected, what types of firm communication were facilitated, and what dimensions of the new communication medium were relevant? We find that the internet did not just enhance trade but improved overall firm performance; results are consistent with improvements in communication with both buyers and input suppliers; benefits arose not just from better communication but from establishing a visible virtual presence, and were enhanced by, but not contingent on, access to broadband.