How Does Market-Specific Import Experience Affect Firms’ Export Market Exit? — Evidence from Chinese Exporters

This study comprehensively explores how a firm’s market-specific import experience affects its export market exit. By utilizing Chinese Customs Data over the period of 2000-2016, we empirically find that import experience increases an exporter’s export market exit probability. Further, we verify three contrasting but not mutually exclusive mechanisms: the market learning mechanism creates a decreasing impact; the sunk cost reduction mechanism creates an increasing impact through the reverse hysteresis effect and the trial-and-error effect; the import-export market overlapping mechanism, a newly identified mechanism by this paper, creates a decreasing impact through risk hedging effect, and an increasing impact through risk amplifying effect, with the former dominating. Besides, we discover some heterogeneous effects and synergic effects of the import experience. Our findings refresh the understanding about import experience and export market exit, and shed novel insights to exporters on how to fully leverage import experiences to promote exports and diversify risks