ABSTRACT
There are two types of export diversification, namely diversification in export markets or products. Chapter 4 focuses on export market diversification. The analysis is based on the Herfindahl‒Hirschman market diversification index estimated for various countries in both regions. The preliminary analysis suggests that export market diversification is positively associated with growth in income in sample countries. Subsequently data were subjected to multivariate analysis.
Several factors such as initial financial resources, infrastructure, international orientation, technological competence, and innovation capacity were included in the analysis. The findings suggest that outward FDI is positively associated with export market diversification. Higher diversification also resulted in creation of more industrial employment. Manufacturing value added significantly influenced diversification. As far as the association between market diversification and innovation capacity is concerned, it follows the same trend as that of manufacturing value added. The chapter concludes that to some extent diversification is path dependent.
