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on International Activities of Firms |
| By: | Masahiro Endoh (Faculty of Business and Commerce, Keio University, Japan); Uraku Yoshimoto (Faculty of International Social Sciences, Yokohama National University, Japan); Naoto Jinji (Graduate School of Economics, Kyoto University, Japan); Keiko Ito (Graduate School of Social Sciences, Chiba University, Japan) |
| Abstract: | Carry-along trade (CAT) is the phenomenon in which manufacturing firms export prod-ucts that they have not produced themselves. This study examines the sizes and charac-teristics of CAT in both intrafirm and interfirm trade, using customs and production data from Japanese manufacturing firms from the 2014–2020 period. Depending on how CAT is defined, it may account for between one-third and two-thirds of total exports by Japanese manufacturing firms, underlining the importance of trade intermediation by producers. The ratio of CAT is notably higher in intrafirm trade than in interfirm trade. The distribution of Japanese trade flows indicates that the sizes of CAT components are influenced not only by demand-scope complementarities but also by country-specific economic factors. The high ratio of CAT in intrafirm trade can be attributed to the larger exports of both sourced and produced products by Japanese multinational firms, due to the elimination of bargaining inefficiency between sellers and buyers. |
| Keywords: | Trade intermediation by producers, Carry-along trade, Intrafirm trade |
| JEL: | F12 F13 F14 L11 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:mof:wpaper:ron384 |
| By: | Jaerim Choi (Yonsei University); Seongin Hong (University of Virginia); Jung Hur (Sogang University); Manho Kang (Georgia Institute of Technology) |
| Abstract: | How does China's rise affect exporters’ product scope when they compete with Chinese firms at home and abroad? Using Korean plant-level data, we find that both domestic import penetration and export competition in third markets reduce product scope. Specifically, export competition dampens new product creation, while import penetration accelerates the destruction of existing products. Eventually, both forms of competition lead to resource reallocation toward core products, highlighting distinct mechanisms through which global competition shapes product dynamics. We propose the disproportionate importance of the domestic market, the forward-looking nature of product creation, and creative destruction as potential drivers behind these responses. |
| Keywords: | Creative Destruction; Export Competition; Import Penetration; Multi-Product Exporters; Product Churning; Product Scope |
| JEL: | D22 F14 F61 L10 L25 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-288 |
| By: | Wulong Gu; Alla Lileeva; Daniel Trefler |
| Abstract: | Conventional wisdom holds that offshoring intermediates to China stimulates innovation. This is not entirely compelling. On the one hand, (a) offshoring lowers marginal costs and expands sales, thereby increasing the returns to innovation, especially for large firms. On the other hand, (b) offshoring low-quality intermediates reduces the costs of older-generation products, thereby reducing the returns to innovating into newer generations. We examine these two opposing forces over 2002-2011 for 6, 024 Canadian firms. Our empirical strategy regresses measures of innovation, such as R&D, on imports of intermediate inputs. To address endogeneity, we construct a model-consistent shift-share instrument whose shocks are the often-dramatic improvements in the quality of HS6 Chinese intermediate inputs. We find that greater offshoring reduced R&D spending over 2002-2011 by 15% as (1) firms engaged in R&D in 2002 reduced their expenditures, and (2) firms not initially engaged in R&D were discouraged from starting up new R&D projects. Our model explains these findings: Rising quality of Chinese intermediates is a positive supply shock (rather than a negative China shock) that raises profits for all offshorers, raises innovation for the largest offshorers (channel a above), and lowers innovation for all other offshorers (channel b). These predictions are confirmed in the data. |
| JEL: | F1 F14 O3 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35167 |