Climate effects on the diversification strategy of export firms: Evidence from China

is the diversification of export destinations [44]. Given the increasingly complex global politi- cal and economic landscape, strategic decisions regarding the international distribution of sales networks have become paramount. Like product diversification, export destinations diversification serves as a crucial risk mitigation strategy for firms [45]. However, due to the associated entry costs, firms face limitations in expanding their export destinations. Typically, firms with higher productivity are better able to cover market entry costs, allow- ing them to develop additional export markets. Conversely, as productivity declines, firms may choose to minimize costs by abandoning certain export markets. Building on previous studies [27], we expect that deviations from the optimal temperature, which tend to reduce firm productivity, will lead firms to reduce their export destinations, resulting in a lower degree of diversification. We then empirically test this hypothesis using the following econo- metric model. Countryicrt ¼ a þ X m6¼6bm 1 Tbinm crt þ d1Xcrt þ gi þ grt þ εicrt ð16Þ The variable Countryicrt denotes the number of destinations of the firms’ exports, while the other variables retain their meanings consistent with the previous context. We refer to the tem- perature bin 13~18˚C as the baseline group for the regression, as the empirical analysis identi- fied it as the optimal category. The regression results are presented in Fig 6, where the solid dots represent the regression coefficients for each temperature bin, accompanied by their

respective 90% confidence intervals. The results show that the regression coefficients for all temperature bins are negative, implying that destination diversification has an inverted U- shaped relationship with the temperature bins, suggesting that as temperatures deviate further from the optimal range, there is a greater reduction in the number of destinations for firms’ exports. In particular, the impact of extremely low temperatures is more pronounced and eco- nomically significant than that of high temperatures. Fig 6. The effects of temperature on firms’ export destination. https://doi.org/10.1371/journal.pone.0308391.g006 PLOS ONE Climate effects on the diversification strategy of export firms PLOS ONE | https://doi.org/10.1371/journal.pone.0308391 August 16, 2024 22 / 28