Institute of Development Studies

New research into product and export diversification in Brazil

16 July 2010 - Vivienne Benson

The Institute of Development Studies (IDS) is leading research into the process of product and export diversification in Brazil. The new 9-month project will close a gap in knowledge about diversification at the firm level, focusing on understanding processes and capabilities by looking at the dynamics of firms and how they produce and export new products.

The project, ‘Firm Behaviour and the Introduction of New Products: Evidence using a Firm Micro Data Set in Brazil', is led by researchers in IDS' Globalisation team and funded by the Economic and Social Research Council (ESRC).

The study is particularly relevant as people around the world continue to respond to the financial crisis. Achieving and sustaining high rates of economic growth in developing countries remains a marked challenge.

Advantages of diversification

Xavier Cirera, IDS Research Fellow and the project's leader explains the advantages of diversification. ‘It is crucial for achieving economic development for several reasons; firstly, diversification reduces vulnerability to external shocks; secondly, it creates learning opportunities and thirdly, it clearly correlates with high rates of growth.'

Cirera notes that the process of product and export diversification is one of the most important issues for emerging economies, such as China, Brazil and India. Yet the current literature does not explore in enough depth the crucial point at which product choice and export takes place.

Brazil is a particularly interesting case study as its export basket is still heavily dependent on natural resources, whilst at the same time, Brazil has developed a few competitive manufacturing sectors.

The project, which is a response to the ESRC initiative on ‘collaborative analysis of micro data resources: Brazil-India' for pathfinder research projects, purposely coincides with two of the core social science challenges noted in ESRCs' 2009-2014 Strategic Plan, ‘Opportunities and Risks in a Changing Global Economy' and ‘Innovation and Skills.'

Project team and expected results

Cirera will lead a group of experts from the UK and Brazil, who have extensive experience of trade related issues, innovation studies and of using quantative methods:

• Dr Anabel Marin, from the Science and Technology Policy Research Unit, at the University of Sussex (SPRU);
• Dr Paulo Figueiredo of Fundação Getulio Vargas (FGV); and
• Dr Ricardo Markwald, Director of Fundação Centro de Estudos do Comércio Exterior.

The team is planning to build a unique dataset that combines data on production, firm characteristics, innovation and trade, to help understand the micro dynamics around diversification. The team will also test the main ideas that come from the trade, innovation, international business and value chain literature.

With product and export diversification a high priority for industrial policy agencies and on the Aid for Trade agenda, the project will have major implications for policymakers and aims to influence future decisions.

Vivienne Benson works in IDS' Globalisation Team.

Related Projects

• Firm Behaviour and the Introduction of New Products: Evidence using a Firm Micro Data Set in Brazil - The objective of this research is to contribute to the understanding of one of the most important processes required for achieving sustained economic growth in emerging and developing countries: the process of product and export diversification. (2010 - 2011)