SUNK COST, INSTITUTIONAL ENVIRONMENT AND GEOGRAPHICAL DYNAMICS OF FIRM EXPORTS
HU Xu-qian1,2, HE Can-fei1,2
1. School of Urban and Environmental Sciences, Peking University, Beijing 100871, China;
2. Peking UniversityLincoln Institute Center for Urban Development and Land Policy, Beijing 100871, China
Abstract：In order to understand the geographical dynamics of firm exports shaped by firms' export decisionmaking and export strategies, it is an important prerequisite to clarify why firms choose to export and the logic of choosing export markets. This paper agrees with the fact that small and medium-sized firms are the main force shaping the export dynamics of China. The main features of these firms include insufficient competitiveness and weak financial situation. From the perspective of cost relevance, this paper mainly uses the China Customs export data from 2002 to 2011 to explore the geographical dynamics and mechanism of firm exports from the perspective of cost. The empirical results illustrate that both the firms' export activity and the spillover of neighboring firms have significant double-sided effects on the entry and exit dynamics of firms in the export markets. On the one hand, firms' export activities are not conducive to firms entering new markets, however, help firms to remain in the existing markets; on the other hand, the spillover of neighboring firms creates favorable conditions for firms to enter new markets, but at the same time, it also accelerates the exiting process. What's more, in many areas, the market-oriented restructuring is relatively lagging behind, and government intervention is still a powerful factor leading the market dynamics, which has shaped China's unique system and market environment. The findings in this paper proves this assumption, that is, in the regions with lower marketization and higher degree of government intervention, the double-sided effects of firms' export activities and spillovers of neighboring firms are more significant and stronger. This means that the local institutional environment can influence the geographical dynamics of Chinese firms' exports, and also shape the motives and strategies of firms' exports.
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