This paper focuses on sunk export costs in the Swedish food and beverage sector. Its purpose is threefold. First, it investigates whether the estimation of the importance of sunk costs is sensitive to persistence bilateral (firm-destination) effects such as specific market knowledge compared to firm-specific effects such as managerial skills or product quality. Second, it analyses the effects of firm and market characteristics on firms’ export decisions. Third, it tests whether the importance of sunk costs varies with destination as well as firm characteristics. The main results are; (1) that firm-destination effects are more important than general, unobserved firm characteristics, (2) that more productive firms are more likely to export and that firms’ expectations from exporting increase with market size and exchange rate stability, and (3) that history dependence in exporting varies with firm and market characteristics.
This article has been published in Food Policy, Vol 36, Issue 2, Pages 101-328 (April 2011) as "Destination and firm-specific export costs: The case of the Swedish food sector"
JEL Classification: F1
Keyword: Sunk costs of exporting, markets, export hysteresis, food and beverage