For God's sake. The impact of religious proximity on firms' exports

Using a rich firm level data set for Turkish manufacturing, we test whether the sharing of similar religious beliefs with potential contracting parties drives a firm’s first time entry in export markets. We exploit variation in the practice of Islam across Turkish NUTS3 regions and we find that firms located in regions characterised by stronger religiousness are more likely to enter export destinations with a higher share of Muslims among their population. This result is robust to the control for past trade, common language, cultural and migration ties and to several further sensitivity checks. In particular, religious proximity eases export entry for producers of "trust intensive" goods and it plays a role in subsequent foreign market entries. All in all, our evidence hints at an export enhancing effect of religious proximity working more through export sunk costs reduction than through similarity in preferences.