How entrepreneurship drives export growth by reducing trade cost elasticity

Trade costs are widely identified as a primary impediment to export expansion. This study novelly explores the role of entrepreneurship – a pivotal cultural factor reflecting risk preference – in shaping export performance through the lens of subjective trade cost perception. We incorporate regional entrepreneurship into a heterogeneous firm trade model by endogenizing the shape parameter of the Pareto productivity distribution. Theoretically, we propose that entrepreneurship promotes exports via a risk-preference mechanism that lowers trade cost elasticity, specifically by dampening the sensitivity of the extensive margin to cost shocks. Using city-industry-destination panel data from China (2010–2015), our results demonstrate that in regions with higher entrepreneurship, a 1% increase in trade costs leads to a reduction in the trade cost elasticity of total exports and the extensive margin by an average of 0.004% and 0.010%. These findings remain robust when employing exogenous natural resource endowments as instrumental variables. Heterogeneity analysis reveals that entrepreneurship plays a more pronounced role in stimulating exports for cities lacking geographical advantages in openness. Furthermore, favourable market institutions significantly strengthen this promotional effect. This research offers a novel perspective on driving export growth through the cultivation of entrepreneurial culture and provides policy implications for balancing regional export development.