How to combine high sunk costs of exporting and low export survival
(2015) In Review of World Economics 151(1). p.23-51- Abstract
- In endeavouring to explain the empirical puzzle that the sunk costs of exporting are important, but that, at
the same time, trade flows do not, on average, survive for very long, this paper explores the concepts of
core and peripheral markets. First, it illustrates that if the importance of sunk costs as well as the expected
future returns from exporting are different, depending on whether the export decision refers to a core or a
peripheral market, it is plausible that while firms will tend to stay on the core market for a long time, they
will enter and exit the peripheral market much more frequently. Second, using firm-product-destinationspecific
export data for all firms in the... (More) - In endeavouring to explain the empirical puzzle that the sunk costs of exporting are important, but that, at
the same time, trade flows do not, on average, survive for very long, this paper explores the concepts of
core and peripheral markets. First, it illustrates that if the importance of sunk costs as well as the expected
future returns from exporting are different, depending on whether the export decision refers to a core or a
peripheral market, it is plausible that while firms will tend to stay on the core market for a long time, they
will enter and exit the peripheral market much more frequently. Second, using firm-product-destinationspecific
export data for all firms in the Swedish food chain for the period 1997–2007, an empirical test is
carried out to ascertain whether there is support for the hypothesis that trade duration will be longer for
core markets. Employing two variables that capture different aspects of the core/periphery dimension, it is
found that firms will indeed tend to stay longer in their core markets, while export decisions regarding
peripheral markets are much less long-term. The conclusion, therefore, is that the empirical puzzle can be
explained by taking into account the fact that the trade hysteresis literature builds on data on the core
market decision to export or not, while the trade survival literature also includes data on decisions to stay
in or exit peripheral markets. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/4698342
- author
- Gullstrand, Joakim LU and Persson, Maria LU
- organization
- publishing date
- 2015
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Review of World Economics
- volume
- 151
- issue
- 1
- pages
- 23 - 51
- publisher
- Springer
- external identifiers
-
- wos:000348566500002
- scopus:84943589315
- ISSN
- 1610-2878
- DOI
- 10.1007/s10290-014-0204-7
- language
- English
- LU publication?
- yes
- id
- c147dab3-421d-4307-990b-8d639d9525e3 (old id 4698342)
- date added to LUP
- 2016-04-01 14:07:10
- date last changed
- 2022-04-14 08:03:37
@article{c147dab3-421d-4307-990b-8d639d9525e3,
abstract = {{In endeavouring to explain the empirical puzzle that the sunk costs of exporting are important, but that, at<br/><br>
the same time, trade flows do not, on average, survive for very long, this paper explores the concepts of<br/><br>
core and peripheral markets. First, it illustrates that if the importance of sunk costs as well as the expected<br/><br>
future returns from exporting are different, depending on whether the export decision refers to a core or a<br/><br>
peripheral market, it is plausible that while firms will tend to stay on the core market for a long time, they<br/><br>
will enter and exit the peripheral market much more frequently. Second, using firm-product-destinationspecific<br/><br>
export data for all firms in the Swedish food chain for the period 1997–2007, an empirical test is<br/><br>
carried out to ascertain whether there is support for the hypothesis that trade duration will be longer for<br/><br>
core markets. Employing two variables that capture different aspects of the core/periphery dimension, it is<br/><br>
found that firms will indeed tend to stay longer in their core markets, while export decisions regarding<br/><br>
peripheral markets are much less long-term. The conclusion, therefore, is that the empirical puzzle can be<br/><br>
explained by taking into account the fact that the trade hysteresis literature builds on data on the core<br/><br>
market decision to export or not, while the trade survival literature also includes data on decisions to stay<br/><br>
in or exit peripheral markets.}},
author = {{Gullstrand, Joakim and Persson, Maria}},
issn = {{1610-2878}},
language = {{eng}},
number = {{1}},
pages = {{23--51}},
publisher = {{Springer}},
series = {{Review of World Economics}},
title = {{How to combine high sunk costs of exporting and low export survival}},
url = {{http://dx.doi.org/10.1007/s10290-014-0204-7}},
doi = {{10.1007/s10290-014-0204-7}},
volume = {{151}},
year = {{2015}},
}