Export Market Participation and Interest Rates: the Role of Organizational Capital

How do interest rates influence firms’ export decisions? We first develop a dynamic model of heterogeneous firms that highlights two key mechanisms: (i) a time lag between export costs and revenues, and (ii) the accumulation of organizational capital. Higher interest rates reduce both the extensive and intensive margins of exporting, the more so for firms with lower organizational capital. We then test these predictions using panel data on Portuguese firms (2008–2021). Our results show that organizational capital mitigates the adverse effect of higher interest rates, and this result is robust to alternative estimation strategies designed to address potential identification concerns. We also show that the magnitude of this mitigating effect depends on firm characteristics shaping access to external funding, i.e., leverage, asset tangibility, and profitability.