A Review on Trade Theory of Heterogeneous Firms

This article has synthesized and evaluated trade and cross -border investment in the perspective of firms.Its starting point is firms that export and others that do not co - exist in the same industries,which contradicts with traditional and new trade theories.Until recently,main trade theories begin to explain on this and have changed with the development of heterogeneous firm models.Relevant literatures explain why firms that export are more productive,together with the reallocation of resources among firms.They point out a causal link between exportation and productivity and how heterogeneous firms choose ways to access to foreign markets.The empirical literature has more and extends across a large number of industrialized,transitional and developing countries.In the end,the essay concludes on a number of problems deserving attention in the field.