(A) study on export exit and re-entry of export firms: focused on sunk cost effect

Abstract

Although there are numerous export theories, there have been few theoretical attempts to comprehensively explain all aspects of export, such as export entry, export exit, and re-entry. This study proved that a theoretical approach that covers the entire export process is possible by comprehensively explaining export entry, export exit, and re-entry through sunk cost effect. This study used various pre-exit export data, such as export volume, export destinations, export items, and whether exports continued for two years before exit, to identify the characteristics of export exit and re-entry. Based on these empirical research results, this study explained export exits that occur on a significant scale despite the sunk cost effect that induces export persistence. Furthermore, this study substantiated the presence of the sunk cost effect, specifically known as the re-entry cost effect, during the process of re-entering the export market subsequent to the exit. The findings of this empirical investigation are anticipated to provide significant assistance to exporting firms in formulating export strategies encompassing export exit and re-entry decisions. Moreover, they are expected to offer valuable insights for the development of global risk management strategies, particularly in the context of unstable international economies such as those affected by the COVID-19 pandemic and the Russo-Ukraine war.