consumer tastes are serially correlated, the longer the period a product is exported, the lower the probability of it being dropped.

Rauch and Watson (2003) also develop a model that implies negative duration dependence. In their model there is a search-and-match game between importers and exporters in presence of information asymmetries and moral hazard. Importers search a reliable supplier while exporters need to be sure of the duration of the relationship before making the relative investments to expand the production capacity. In such conditions export transactions are characterized by trial and error, or small experiments to “test” the partner. Once they survive these tests, the mortality decreases.

Both Bernard et al. (2010) and Rauch and Watson (2003) predict that product survival is positively related to the value of the export flow. In Rauch and Watson (2003) this derives from the fact that when importers are uncertain about the capacity of the exporter to comply with the order requirements, or the exporter faces uncertainty with regards to its production capacity, or about the importer’s reliability, they may start with small orders, to update their information about each other through trial and error. In Bernard el al. (2010) a higher value of the export flow implies a high value of the consumer taste and thus a lower probability of dropping the product. The effect of the scale of the trade flow on survival has been documented in several empirical studies (Gorg et al. 2012; Cadot et al. 2013).

There is scarce literature on the links between diversification strategies and survival. One of the examples is Volpe and Carballo (2009). The authors look at the specific link between firms’ diversification strategies and export survival in an empirical application for the Peruvian case, and find that market and product diversification increases the survival rate of Peruvian firms in export markets. They explain the results with a portfolio argument for which firms exporting different products or in different destinations can take advantage of the non-perfect covariance of sales of different products/markets to reduce the overall variability of sales and thus increase the likelihood of survival in export markets.

The literature has also explored the role of network effects in the success of export flows under the hypothesis that other exporters could facilitate entering and surviving into foreign markets for other firms of the same country. Cadot et al. (2013) find evidence of ‘network effects’ in determining export survival chances. The authors find that survival probabilities increase with the number of same-country firms exporting the same product to the same destination, suggesting the existence of cross-firm informational externalities.

# **3. Data**

The analysis is based on a unique data set from Georgian Customs’ export transaction data merged with firm level data obtained from Georgia’s National Statistics Office, Geostat. The firm level data consists of a panel of Georgian firms spanning the period 2006-2012. This is matched with Customs data recording all export transactions occurred in the same period using a common firm identifier. Large firms (those with more than 100 employees) are all included in the data set while small and medium enterprises have been randomly sampled. There are 13,816 firm-year 4