Heterogeneity, sunk cost, and export performance: A firm level study of Pakistan's textile sector

The textile sector is a significant exporting sector of Pakistan. This study examines the determinants of the export performance of Pakistani textile firms using firm-level panel data from 2008 to 2018. Under the framework of the dynamic System Generalized Method of Moment (SGMM) methodology, our findings suggest that both sunk costs and firm-specific characteristics like productivity, age, and size are important determinants of textile exports. Further, the study also observes that firms with a high number of export destinations and greater product diversification tend to export more. The year-specific dummies reveal that textile export performance is adversely affected by the energy crisis in 2012. We recommend that Pakistan should support large, experienced, and productive textile exporter firms to boost textile exports. Besides, more assistance should be provided regarding potential overseas markets to the existing and new export firms.