GSICS Working Paper Series The Role of Entry Costs and Heterogeneous Characteristics of Firms in the Decision to Export: Empirical Evidence from Firm-level Data in Vietnam

This paper contributes to the examination of factors that affect the decision to export of firms. Using a panel of firm-level data in Vietnam’s manufacturing sector, we test for the role of sunk costs and heterogeneous characteristics of firms in determining firms’ probability of exporting. Under a framework that controls for unobserved heterogeneity among firms, we find that the sunk entry costs are important factor that makes export status highly persistent in Vietnam. Firm size, firm age and foreign ownership are positively related to export probability of firms, while total factor productivity has no statistically significant effect. Besides, firms with labor-intensive technology, more skilled labors or competitive labor service are more likely to export. -----------------------------------------------------------------------------------------------------------------------------------Acknowledgements: We thank The World Bank Group for allowing us to have access to the data used in this paper. All the analysis, interpretations and conclusions drawn from the data in this paper are entirely and solely those of ours.