We study how incumbent exporters adjust to firm-specific export demand shocks, using matched firm-, product- and destination-level data for Finnish and Swedish manufacturing firms over 1999–2014. We construct an exogenous measure of firm-level demand shocks based on changes in destination–product imports, and analyse responses at both the intensive and extensive margins of trade. Despite similar levels of openness and export structure, exporters in the two countries exhibit distinct adjustment patterns. Swedish firms respond strongly to positive demand shocks by expanding exports while simultaneously narrowing their export portfolio, reallocating sales towards core markets and products. Finnish firms, in contrast, show Limited export expansion and adjust less along the product margin, instead reallocating sales towards domestic markets during downturns. We find limited evidence that firms’ financial strength explains these differences. The results highlight the central role of firm-level extensive-margin adjustments in shaping aggregate export dynamics, and provide a micro-level explanation for the diverging post global financial crisis export trajectories of Finland and Sweden.
Economica, 1–25, 2026.
