Relationship-Specific Sunk Costs and Exporter Decisions
AbstractUsing macro-level trade data, we investigate how different types of sunk costs influence decisions of exporters. We find that exporters’ decisions reflect sensibly their desire to minimize the relationship-specific sunk costs. Specifically, exporters of differentiated products are more likely to reenter the export market than exporters of homogenous products. Also, the former are more likely to stay in the export market and exhibit more stability when doing so than the later. All of our findings are consistent with the view that relationship with their foreign partners matters more for trade in differentiated products than in homogenous ones.
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Bibliographic InfoPaper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2007_06.
Length: 21 pages
Date of creation: 16 Oct 2007
Date of revision:
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International Trade; Market Reentry; Market Exit; Networks; Sunk Costs; Transition Probability Matrix;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
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