Export market participation with sunk costs and firm heterogeneity

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Abstract:

In this article we investigate the importance of sunk costs, firm characteristics and spillovers from nearby exporters on a firm's decision to participate in exporting. The empirical analysis involves the estimation of a nonstructural, discrete choice, dynamic model with firm heterogeneity. By using panel data for Estonian companies from 1994 to 1999 we find that: (i) both sunk costs and observable firm characteristics are important determinants of export market participation; (ii) previous history matters, in that, if a firm has been exporting the previous period or the period before, it significantly increases the likelihood of the firm exporting in the current period; (iii) larger firms with high capital intensity and foreign ownership are more likely to be exporters; (iv) operating in an export-oriented industry increases a firm's likelihood of exporting.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840802112372

Affiliations: Department of International Economics and Management, Copenhagen Business School, Frederiksberg, Denmark

Publication date: October 1, 2010

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