Sunk exporting costs and export market coverage

This paper provides evidence on the role of sunk costs in the market expansion of continuing exporters, explicitly accounting for the number of target export destinations. We use dynamic count data models to address the discrete non‐negative nature and skewed distribution of the dependent variable, the number of export markets. By examining the trade patterns of individual firms, we find that past export market coverage significantly improves the ability of Ukrainian exporters for further expansion. The results also indicate that information spillovers from neighbouring firms and foreign ownership are not important factors for the market expansion of incumbent exporters.