Heterogeneous Firm Theory and the Determinants of Export Market Diversification Among Nigerian Non-Oil Exporting Firms

This dissertation applies and extends heterogeneous firm trade theory to explain the determinants of export market diversification among Nigerian non-oil exporting firms, generating original empirical contributions to the trade literature within the context of a primary commodity-dependent developing economy. Melitz's heterogeneous firm model predicts that only the most productive firms will export, and among exporters, the most productive will serve the most distant and demanding markets. However, the applicability of this framework to Nigerian exporters operating with severe infrastructure constraints, limited trade finance access, and institutional barriers has not been rigorously tested. The study constructs a novel matched dataset combining firm-level production and export data from the National Bureau of Statistics Manufacturing Survey, Nigerian Customs Service export records, and the Nigerian Investment Promotion Commission investment database, covering 850 non-oil exporting firms from 2012 to 2022. A two-stage Heckman selection model corrects for non-random export market participation, and the determinants of extensive and intensive margin export diversification are estimated separately. The theoretical framework integrates the Melitz heterogeneous firms model, the sunk cost theory of market entry, and the resource-based view of export capability development. The dissertation contributes an original treatment of sunk market entry costs as endogenously shaped by institutional quality, generating a modified theoretical model with testable predictions for developing economy contexts. Original contributions include the matched dataset methodology, the institutional sunk cost extension of heterogeneous firm theory, and empirically identified firm-level and destination market predictors of diversification success. Keywords: heterogeneous firms, export diversification, non-oil exports, Nigeria, trade theory