A longitudinal study of self-selection, learning-by-exporting and core-competence: The case of smalland medium-sized enterprises in Vietnam

resources towards their core-competence, which are in labor-intensive 
products. Participation of the SMEs in exporting has not yet increased Vietnamese SMEs' capital intensity. Instead, the focus of 
the SMEs has been still on labor-intensive industries, of which the competitive advantages come from labor abundance and low-
wages in transition economies like Vietnam. 
Acknowledgements 
This research is funded by Vietnam National Foundation for Science and Technology Development (NAFOSTED) under grant 
number 502.01-2018.03. 
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Appendix A 
Bernard and Jensen (1995, 1999, 2004) started with a simple case with one time period and no entry cost, the profit function it 
of firm i at time period t is as below: 
it (Xt, Zit) = pt . qit* - cit (Xt, Zit| qit*) Eq. (A.1) 
where qit* is the optimal quantity produced if a firm exports; cit is the cost of producing quantity qit*; pt is the selling price of goods 
in the foreign market; Xt is the vector of exogenous factors that affect production of the firm such as exchange rate, export promotion 
regimes; Zit is a vector of all endogenous or firm-specific factors that have influence on profitability such as productivity, size, age, 
labor quality, innovation. If an expected profit of exporting is equal to or greater than zero, a firm will export. Otherwise, it 
remains serving the domestic market only. Denoting Yit as firm i’s export status at time t, then Yit =1 if it 0 and Yit =0 if 
it<0. In the multiple periods case, let  represent a single discounting rate, then expected profit of a firm becomes: 
it (Xt, Zit) = Et ( ) 
Eq. (A.2) 
As long as the cost function of today production does not depend on production in previous periods, then the expected profit 
function in the multi-period case is similar to the single period case. Otherwise, the current export status will have effects on 
future export status and the value function of the optimizing problem is as follow: 
( it. Yit + . Et [Vit+1(.)|q*it] ) Eq. (A.3) 
A firm will export in period t if the following inequality satisfies: 
it + . Et[Vit+1 (.) | q*it>0] > . Et[Vit+1 (.) | q*it=0] Eq. (A.4) 
 s t.[ ps.q*is cis.(Xs, Zis | qis*)]
s t
 
Vit (.) max{q*it }
 492
Entry costs are denoted by N. It is normal to make an assumption that firm will not have to pay entry costs if they had already 
exported (i.e. N=0 if Yit-1=1). When making a decision to export, firms understand that if they export today, they might not 
have to pay entry costs in the future. In a single-period case with entry costs, a firm’s profit is specified as follows: 
Π௜௧ᇱ (Xt, Zit, q*it-1) = pt . qit* - cit (Xt, Zit, q*it-1| qit*) – N (1-Yit-1) Eq. (A.5) 
This means firms do not have to pay entry cost if they exported in the previous periods, i.e. Yit-1=1. Firms will export if expected 
profits minus entry costs are positive. It means Yit=1 if Π௜௧ᇱ >0. In a multi-period case with entry costs, firms choose a sequence 
of output levels, , that maximizes current and discounted future profit. It means it = Et ( s-t [Π௜௦ᇱ .Yis]), where in 
the single-period Π௜௦ᇱ is non-negative as firms have an option of not exporting. With a value function as represented below: 
(Π௜௧ᇱ . [q*it >0]+ . Et [Vit+1(.)|q*it]) Eq. (A.6) 
Firm i will export in time t if expected profit net any entry costs is greater than zero as follows: 
pt . qit*+ . (Et[Vit+1 (.) | q*it>0] - Et[Vit+1 (.) | q*it=0]) - cit (Xt, Zit, q*it-1| qit*) – N (1-Yit-1) >0 Eq. (A.7) 
Or 
pt . qit*+ . (Et[Vit+1 (.) | q*it>0] - Et[Vit+1 (.) | q*it=0]) > cit (Xt, Zit, q*it-1| qit*) + N (1-Yit-1) Eq. (A.8) 
If we define Π௜௧∗ = pt . qit*+ . (Et[Vit+1 (.) | q*it>0] - Et[Vit+1 (.) | q*it=0]), the decision to export by firm is given by the 
following discrete choice equation: 
𝑌௜௧ = ൜1 𝑖𝑓 Π௜௧∗ − 𝑐௜௧ − 𝑁(1 − 𝑌௜௧ିଵ) ൐ 00 𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒 Eq. (A.9) 
According to Roberts and Tybout (1997), a method of non-structural binary choice can be used to estimate the decision to export 
with the following empirical model: 
𝑌௜௧ = ቄ1 𝑖𝑓 𝛽𝑋௜௧ ൅ 𝛾𝑍௜௧ − 𝑁(1 − 𝑌௜௧ିଵ) ൅ 𝜀௜௧ ൐ 00 𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒 Eq. (A.10) 
© 2020 by the authors; licensee Growing Science, Canada. This is an open access article distributed 
under the terms and conditions of the Creative Commons Attribution (CC-BY) license 
( 
{qit
*}s t
s t
 
Vit (.) max{q*it }