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

Further analysis examines the influence of temperature on the diversification of firms’ export relationships. The diversification of relationships is defined as the number of country- product pairs for exports. When this variable is substituted into Eq (16) for the regression, the results presented in Fig 7 show an inverted U-shaped pattern. In contrast to the effect on export destinations, the high-temperature bins yield more significant coefficients, indicating a significant reduction in firms’ export relations as the positive deviation from the optimal tem- perature increases. In the low-temperature bins, only the coefficient for -2~3˚C passes a 10% significance test. The above results suggest an inverted U-shaped relationship between temper- ature and the diversification of firms’ export destinations and relationships, but characterized by an asymmetric effect between high and low temperatures. Discussion Previous studies have revealed a nonlinear, inverted U-shaped relationship between tempera- ture and economic output at both macro and micro levels. Specifically, micro-level research indicates that extreme temperatures reduce industrial firms’ output, productivity, export vol- umes, and product quality. Using non-parametric models, this paper examines how tempera- ture influences export firms’ diversification strategies. Unlike prior research that focused on the scale of firms or economies, this study delves into how extreme temperatures affect the variety of exported products, export partners, and relationships. This provides a deeper under-

standing of the multidimensional impacts of extreme temperatures on economic behavior and their profound economic implications. The findings reveal that export firms adjust their diver- sification strategies in response to frequent extreme temperatures, affirming the inverted U- shaped relationship between temperature and export diversification. Our study complements previous micro-level climate economics research by emphasizing export diversification. These Fig 7. The effects of temperature on firms’ export relationship diversification. https://doi.org/10.1371/journal.pone.0308391.g007 PLOS ONE Climate effects on the diversification strategy of export firms PLOS ONE | https://doi.org/10.1371/journal.pone.0308391 August 16, 2024 23 / 28