IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0308391.html
   My bibliography  Save this article

Climate effects on the diversification strategy of export firms: Evidence from China

Author

Listed:
  • Junmei Zhang
  • Lianying Yao

Abstract

Using a multi-product trade model, this study investigates the impact of temperature on firms’ diversification in the export market. Using export and meteorological data of Chinese firms from 2000 to 2016, the empirical results confirm an inverted U-shaped relationship, implying that extreme temperatures significantly reduce firms’ export product diversification. The analysis shows that extreme temperatures primarily reduce the variety of both new and existing products, with a less robust effect on product exit strategies. General trade firms are more adaptable to extreme temperatures than processing trade firms, and are likely to maintain diversified strategies. Stronger regional financial markets and higher energy consumption increase the adaptability of local firms to extreme temperatures. Firms have not yet adapted to local climatic norms. Furthermore, extreme temperatures also partly inhibit diversification of export destinations and relationships. The results of the study show that as climate change intensifies, leading to more frequent extreme temperatures, firms will face significant hurdles in pursuing diversified development strategies, pointing to increasing challenges ahead.

Suggested Citation

  • Junmei Zhang & Lianying Yao, 2024. "Climate effects on the diversification strategy of export firms: Evidence from China," PLOS ONE, Public Library of Science, vol. 19(8), pages 1-28, August.
    • Handle: RePEc:plo:pone00:0308391
    DOI: 10.1371/journal.pone.0308391
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0308391
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0308391&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0308391?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Li, Chengzheng & Cong, Jiajia & Yin, Lijuan, 2021. "Extreme heat and exports: Evidence from Chinese exporters," China Economic Review, Elsevier, vol. 66(C).
    2. Zhang, Peng & Deschenes, Olivier & Meng, Kyle & Zhang, Junjie, 2018. "Temperature effects on productivity and factor reallocation: Evidence from a half million chinese manufacturing plants," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 1-17.
    3. Da Mata, Daniel & Resende, Guilherme, 2020. "Changing the climate for banking: The economic effects of credit in a climate-vulnerable area," Journal of Development Economics, Elsevier, vol. 146(C).
    4. Linsenmeier, Manuel, 2023. "Temperature variability and long-run economic development," Journal of Environmental Economics and Management, Elsevier, vol. 121(C).
    5. Huang, Kaixing & Zhao, Hong & Huang, Jikun & Wang, Jinxia & Findlay, Christopher, 2020. "The impact of climate change on the labor allocation: Empirical evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    6. Kalina Manova & Shang-Jin Wei & Zhiwei Zhang, 2015. "Firm Exports and Multinational Activity Under Credit Constraints," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 574-588, July.
    7. Andreas Lendle & Pierre-Louis Vézina, 2015. "Internet Technology and the Extensive Margin of Trade: Evidence from eBay in Emerging Economies," Review of Development Economics, Wiley Blackwell, vol. 19(2), pages 375-386, May.
    8. Serguey Braguinsky & Atsushi Ohyama & Tetsuji Okazaki & Chad Syverson, 2021. "Product Innovation, Product Diversification, and Firm Growth: Evidence from Japan's Early Industrialization," American Economic Review, American Economic Association, vol. 111(12), pages 3795-3826, December.
    9. Chen, Xiaoguang & Yang, Lu, 2019. "Temperature and industrial output: Firm-level evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 257-274.
    10. Fishman, Ram & Carrillo, Paul & Russ, Jason, 2019. "Long-term impacts of exposure to high temperatures on human capital and economic productivity," Journal of Environmental Economics and Management, Elsevier, vol. 93(C), pages 221-238.
    11. Olivier Deschênes & Michael Greenstone, 2007. "The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather," American Economic Review, American Economic Association, vol. 97(1), pages 354-385, March.
    12. Olivier Deschenes & Michael Greenstone & Jonathan Guryan, 2009. "Climate Change and Birth Weight," American Economic Review, American Economic Association, vol. 99(2), pages 211-217, May.
    13. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    14. Valentin Dimitrov & Sheri Tice, 2006. "Corporate Diversification and Credit Constraints: Real Effects across the Business Cycle," The Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1465-1498.
    15. Ingrid Dallmann, 2019. "Weather Variations and International Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(1), pages 155-206, January.
    16. Lu, Yi & Tao, Zhigang & Zhang, Yan, 2018. "How do exporters adjust export product scope and product mix to react to antidumping?," China Economic Review, Elsevier, vol. 51(C), pages 20-41.
    17. Kerstin K. Zander & Wouter J. W. Botzen & Elspeth Oppermann & Tord Kjellstrom & Stephen T. Garnett, 2015. "Heat stress causes substantial labour productivity loss in Australia," Nature Climate Change, Nature, vol. 5(7), pages 647-651, July.
    18. Nora Pankratz & Rob Bauer & Jeroen Derwall, 2023. "Climate Change, Firm Performance, and Investor Surprises," Management Science, INFORMS, vol. 69(12), pages 7352-7398, December.
    19. Jimmy Karlsson, 2021. "Temperature and Exports: Evidence from the United States," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(2), pages 311-337, October.
    20. Yanyan Ouyang & Chuanwang Sun & Xiaonan Wei & Chuangyu Xie, 2023. "Will Temperature Changes in the Host Country Reduce the Inflow of International Direct Investment? Micro Evidence from Chinese Listed Companies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(4), pages 781-806, December.
    21. Miaojie Yu, 2015. "Processing Trade, Tariff Reductions and Firm Productivity: Evidence from Chinese Firms," Economic Journal, Royal Economic Society, vol. 125(585), pages 943-988, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ouyang, Yanyan & Wang, Shengquan & Weng, Dabin & Zhang, Wenhao, 2024. "Temperature and domestic trade: City evidence from China," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 130-149.
    2. Feriga, Moustafa & Lozano Gracia, Nancy & Serneels, Pieter, 2024. "The Impact of Climate Change on Work Lessons for Developing Countries," IZA Discussion Papers 16914, Institute of Labor Economics (IZA).
    3. Li, Chengzheng & Cong, Jiajia & Yin, Lijuan, 2021. "Extreme heat and exports: Evidence from Chinese exporters," China Economic Review, Elsevier, vol. 66(C).
    4. Wei, Xiahai & Li, Jianan & Liu, Hongyou & Wan, Jiangtao, 2023. "Temperature and outdoor productivity: Evidence from professional soccer players," Journal of Asian Economics, Elsevier, vol. 87(C).
    5. Yanyan Ouyang & Chuanwang Sun & Xiaonan Wei & Chuangyu Xie, 2023. "Will Temperature Changes in the Host Country Reduce the Inflow of International Direct Investment? Micro Evidence from Chinese Listed Companies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(4), pages 781-806, December.
    6. Moustafa Feriga & Mancy Lozano Gracia & Pieter Serneels, 2024. "The impact of climate change on work lessons for developing countries," CSAE Working Paper Series 2024-02, Centre for the Study of African Economies, University of Oxford.
    7. Philippe Kabore & Nicholas Rivers, 2023. "Manufacturing output and extreme temperature: Evidence from Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(1), pages 191-224, February.
    8. Lyu, Zhuoyang & Yu, Li & Liu, Chen & Ma, Tiemeng, 2024. "When temperatures matter: Extreme heat and labor share," Energy Economics, Elsevier, vol. 138(C).
    9. Zhang, Zhiyue & Zhang, Wenhao & Wu, Qingyang & Liu, Jiahe & Jiang, Lei, 2024. "Climate Adaptation through Trade: Evidence and Mechanism from Heatwaves on Firms' Imports," China Economic Review, Elsevier, vol. 84(C).
    10. Sam Cosaert & Adrián Nieto & Konstantinos Tatsiramos, 2023. "Temperature and Joint Time Use," CESifo Working Paper Series 10464, CESifo.
    11. Tarsia, Romano, 2024. "Heterogeneous effects of weather shocks on firm economic performance," LSE Research Online Documents on Economics 124251, London School of Economics and Political Science, LSE Library.
    12. Tang, Yuwei & He, Zhenyu, 2024. "Extreme heat and firms' robot adoption: Evidence from China," China Economic Review, Elsevier, vol. 85(C).
    13. Santeramo, Fabio Gaetano & Bozzola, Martina & Lamonaca, Emilia, 2020. "Impacts of Climate Change on Global Agri-Food Trade," 2019: Recent Advances in Applied General Equilibrium Modeling: Relevance and Application to Agricultural Trade Analysis, December 8-10, 2019, Washington, DC 339375, International Agricultural Trade Research Consortium.
    14. Chen, Xinming & Fang, Tong, 2024. "Temperature anomalies and foreign direct investment: City-level evidence from China," International Review of Financial Analysis, Elsevier, vol. 91(C).
    15. Li, Chengzheng & Cong, Jiajia & Gu, Haiying & Zhang, Peng, 2021. "The non-linear effect of daily weather on economic performance: Evidence from China," China Economic Review, Elsevier, vol. 69(C).
    16. repec:hal:wpaper:hal-03753384 is not listed on IDEAS
    17. Pratik Thakkar & Kausik Gangopadhyay & Rupayan Pal, 2023. "Temperature shock and economic growth: Does spillover effect hurt more?," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2023-014, Indira Gandhi Institute of Development Research, Mumbai, India.
    18. Li Chen & Bin Jiang & Chuan Wang, 2023. "Climate change and urban total factor productivity: evidence from capital cities and municipalities in China," Empirical Economics, Springer, vol. 65(1), pages 401-441, July.
    19. Zhang, Shaohui & Guo, Qinxin & Smyth, Russell & Yao, Yao, 2022. "Extreme temperatures and residential electricity consumption: Evidence from Chinese households," Energy Economics, Elsevier, vol. 107(C).
    20. Sourafel Girma & Holger Görg, 2022. "Productivity effects of processing and ordinary export market entry: A time‐varying treatments approach," Review of International Economics, Wiley Blackwell, vol. 30(3), pages 836-853, August.
    21. Yan Chen & Xiaohong Chen & Hongshan Ai & Xiaoqing Tan, 2022. "Temperature and Migration Intention: Evidence from the Unified National Graduate Entrance Examination in China," IJERPH, MDPI, vol. 19(16), pages 1-23, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0308391. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.