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on International Activities of Firms |
| By: | Ra\'ul M\'inguez; Asier Minondo |
| Abstract: | Some firms export their own products directly, others rely on intermediary firms to export on their behalf, and still others both export their own products and intermediate exports for other producers. To explain this heterogeneity, we develop a model in which firms differ along two dimensions: manufacturing capability and commercial capability. Manufacturing capability lowers the marginal cost of producing a variety, whereas commercial capability lowers the variable cost of reaching foreign customers. Different combinations of these capabilities generate the different types of firms observed in export markets: direct exporters, indirect exporters, pure intermediaries, and hybrid firms. The model predicts that commercially capable intermediaries are matched with more manufacturing-capable producers, and that more commercially capable intermediaries export a broader set of varieties. We provide suggestive evidence for these predictions using Spanish firm-level export data. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.18684 |
| By: | Conteduca, Francesco Paolo; Errico, Marco; Leone, Fabrizio; Panon, Ludovic; Romanini, Giacomo |
| Abstract: | Bilateral trade shocks affect firms in third countries by redirecting demand and reallocating competition across markets, creating winners and losers. We propose a tractable trade model with heterogeneous firms to decompose firm-level export responses as a function of destination-specific changes in demand, own-price and cross-price elasticities, and external economies of scale. Using the 2018–2019 US-China trade war as a source of exogenous variation and data on the universe of Italian firms, we show how bilateral trade shocks occurring elsewhere identify these primitives for third countries. On average, the US-China trade war created a 2.5% export gain, albeit with substantial heterogeneity across firms. The external economies of scale channel accounts for three-quarters of changes in export performance. |
| Keywords: | Firm heterogeneity |
| JEL: | D21 D22 E65 F13 F14 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21421 |
| By: | Holger Breinlich (University of Surrey); Elsa Leromain (University of Antwerp); Martina Magli (LMU Munich) |
| Abstract: | This paper examines how supply-chain disruptions triggered by the UK-EU Trade and Cooperation Agreement (TCA) in 2021 affected UK firms and workers. Using matched UK microdata linking firm-level goods and services trade to firm’s outcomes and employer-linked worker records, we document a sharp decline in firms’ imports of intermediate goods from the EU after 2021. This contraction is moderated for firms that also trade services, suggesting that joint sourcing of goods and services shapes resilience to trade frictions. In contrast, we find no statistically meaningful response of intermediate services imports to either the Brexit referendum or the TCA. We then show that firms more exposed to EU input sourcing experience declines in employment, sales, and the wage bill, with corresponding effects on workers’ hours and pay. These impacts are heterogeneous across occupations, with larger losses concentrated among lower-skilled roles. |
| JEL: | F13 F14 F16 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:sur:surrec:0526 |
| By: | Graziano, Alejandro; Sztajerowska, Monika; Volpe Martincus, Christian |
| Abstract: | This paper provides new evidence on tariff-induced reorganization of multinational production. Exploiting the 2018–2019 U.S. tariffs on Chinese goods, we show that Chinese MNEs expanded foreign affiliates disproportionately in third countries with high revealed production suitability for serving the U.S. market, especially in tariff-exposed sectors. Trade agreements with the U.S. amplified this reallocation. We also document that firms anticipated these trade policy changes as tariff increases began to be proposed in 2016-2017. Back-of-the-envelope calculations suggest tariff-induced Chinese FDI in third countries accounts for 43–52% of Chinese cross-border investment projects. |
| Keywords: | Tariffs |
| JEL: | F13 F21 F23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21547 |
| By: | Chung, Wanyu; Elliott, Robert; Han, Yangjun |
| Abstract: | More than 85% of UK non-EU export value is facilitated by customs agents, yet little is known about how firms organize and adjust these relationships. This paper provides novel evidence on trader-agent relationships using transaction-level UK customs data from 2009 to 2019. We document a highly concentrated and skewed network structure: while most trader-agent links are short-lived and low value, a small number of persistent relationships account for the majority of agent-mediated trade. We show that agent use reflects two distinct strategic motives. Firms are more likely to rely on agents when entering new markets or introducing new products (exploration), but these relationships are shallow and short-lived. In contrast, when firms trade in markets aligned with their agent’s established expertise (exploitation), relationships are deeper and more persistent. Finally, exploiting the 2016 Brexit referendum as a major policy uncertainty shock, we show that firms more exposed to EU markets reorganize and deepen their reliance on customs agents. Our findings identify customs intermediation as an important organizational margin through which firms manage border frictions and trade policy uncertainty. |
| Keywords: | Customs agents; Firm-to-firm networks; Intermediaries; Export dynamics |
| JEL: | F13 F14 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21444 |
| By: | Abberger, Klaus; Bibaj, Arbërim; Gersbach, Hans; Perakis, Alexis; Rathke, Alexander; Sarferaz, Samad; Walsh, Kieran James |
| Abstract: | We study how firms’ expectations respond to prospective tariff shocks using a randomized survey experiment among Swiss manufacturing firms. When confronted with potential U.S. tariffs, respondents expect sizable declines in turnover and investment, yet anticipate increases in ex-tariff export prices despite falling demand. This combination of declining activity and rising prices runs counter to the standard prediction of trade models, in which tariffs reduce foreign demand and put downward pressure on exporters’ prices. The observed pattern is consistent with a destination-specific costpush mechanism, whereby tariffs raise exporters’ marginal costs through compliance burdens, logistical frictions, or reduced scale. Embedding firms’ stated price and sales expectations in a parsimonious structural pricing model, we quantify the implied cost changes and recover sector-level demand elasticities. The estimates indicate substantial heterogeneity across industries and are, on average, consistent with short-run trade elasticities from the recent literature. Moreover, we corroborate the experimental evidence using panel survey data on firms’ expectations around an unexpected U.S. tariff announcement. |
| Keywords: | International trade; Tariffs; Firm expectations; Pricing; Cost pass-through |
| JEL: | F13 D22 E31 D84 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21269 |
| By: | Crowley, Meredith A.; Domenech Palacios, Mar; Faraglia, Elisa; Giannitsarou, Chryssi; Havemeister, Lea |
| Abstract: | Geopolitical uncertainty alters the incentives of firms to organise their corporate structure across borders, creating a distinct margin of adjustment in response to policy risk. We study this margin using the Brexit referendum as a quasi-natural experiment. We combine firm level data on parent-subsidiary links for UK and EU firms between 2011 and 2021 with measures of Brexit-related uncertainty and study changes in foreign subsidiary formation at the extensive margin. Following the referendum, there was an increase in the number of subsidiary formation from the UK into the EU, while the number of EU firms that expanded with subsidiaries into the UK dropped. UK firms establishing their first EU subsidiary after the referendum were systematically weaker ex ante than comparable firms that did so before the referendum. Increased Brexit-related uncertainty is associated with increased foreign subsidiary formation from the UK into the EU, driven primarily by small firms, alongside suggestive evidence of decreased domestic subsidiary incorporation by UK firms. We interpret these findings as evidence of a 'precautionary' foreign direct investment channel, operating through changes in the corporate structures of firms in response to geopolitical uncertainty. |
| Keywords: | Brexit; geopolitical uncertainty; foreign subsidiary |
| JEL: | F21 F23 G32 F15 D22 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21312 |
| By: | Aitor Garmendia-Lazcano; Ra\'ul M\'inguez; Asier Minondo |
| Abstract: | Previous studies conclude that intermediaries account for a large share of exports. Using Spanish firm-level data, we show that many firms classified as intermediaries are either manufacturer-owned export arms that ship their parent firms' products or vertically integrated firms that control design, production, and distribution and predominantly export goods sold under their own brands. Once we exclude these export arms and vertically integrated firms, the share of intermediaries in exports in our sample falls by about 70%. We also show that pure intermediaries differ markedly from export arms and vertically integrated firms along key firm and export dimensions. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.18719 |
| By: | Görg, Holger; Mao, Haiou; Driffield, Nigel |
| Abstract: | Divestments by foreign multinationals are an important phenomenon that is largely neglected in the literature. We use firm‐level panel data from China to estimate the impact of such divestments on the performance of domestic firms in the local economy. To the best of our knowledge, there is no empirical study that has looked at these effects. Our results suggest that, overall, domestic firms may be able to benefit from divestments by foreign firms through spillovers. We find evidence suggesting that the positive overall effect for private firms is driven by the movement of workers from the divested firm to the local firm, as well as by a reduction in competition reducing crowding out. By contrast, local firms are negatively affected by the loss of technology transfer and customer–supplier relationships with foreign firms. While most effects are short‐lived, the negative impact on technology transfer persists over time. |
| Keywords: | foreign divestment, multinational enterprises, spillovers |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:335592 |
| By: | Arnarson, Björn Thor; Buus, Magnus Tolum; Moxnes, Andreas; Munch, Jakob Roland; Xiang, Chong |
| Abstract: | We study how firm growth reorganizes the division of labor across firms in global value chains. Using a novel dataset linking cross-border firm-to-firm transactions to matched employer–employee data, we show that demand shocks increase trade between firms while reducing occupational similarity, implying greater specialization. We develop and estimate a model of task outsourcing in which firms expand by reallocating tasks to suppliers. The model matches the data and implies endogenous scale economies. Eliminating outsourcing reduces average labor productivity by 25 percent and increases input costs by 10 percent, highlighting the central role of specialization in shaping firm performance. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21543 |
| By: | Estrin, Saul; Nachum, Lilac; Hu, Yuan |
| Abstract: | Extant research offers inconclusive evidence on how firms’ export modes affect learning and innovation. Drawing on a Penrosian perspective, we argue that simultaneously pursuing direct and indirect exporting generates complementarities, as excess resources and experiential knowledge developed in one mode can be redeployed in the other. As a result, the combined export strategy yields stronger learning and innovation outcomes than either strategy pursued alone. We further theorize that these benefits depend on firm‑level resources and the characteristics of the learning environment. Using data on more than 4, 000 African exporters from the World Bank Enterprise Surveys, we find robust evidence that firms combining direct and indirect exporting modes innovate more than single‑mode exporters across multiple specifications and estimation techniques. The African context allows us to highlight how institutional and resource constraints shape learning through exporting. |
| Keywords: | direct and indirect exporting simultaneously; learning; innovation; theory of the growth of the firm; African firms; emerging market firms |
| JEL: | J50 |
| Date: | 2026–05–12 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138306 |
| By: | José L. Fillat; Stefania Garetto |
| Abstract: | We study the relationship between management, multinational expansion, and risk premia. We document two facts: firms run by better managers are more likely to become multinationals (MNEs), and risk premia are higher for current and future MNEs than for firms that remain exclusively domestic. We develop a model in which endogenous matching between heterogeneous firms and managers jointly determines selection into foreign direct investment (FDI) and risk premia. Quantitatively, we use the model to examine how corporate taxation and distortions in the market for managerial talent affect multinational activity, firm risk exposure, and financial market outcomes. |
| JEL: | F12 F23 F36 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35361 |
| By: | Eppinger, Peter; Kukharskyy, Bohdan; Naghavi, Alireza; Ottaviano, Gianmarco |
| Abstract: | We examine how firms strategically slice up global production processes to protect proprietary knowhow. By sourcing fewer inputs from each supplier, firms avoid the concentration of information in the hands of individual suppliers and thereby reduce the risk of imitation. Using rich micro data on firm-to-firm trade in automotive components, we uncover a robust U-shaped relationship between the number of components sourced per supplier (concentration) and the strength of intellectual property rights (IPR) protection. This U-shape can be rationalized by a combination of a protective effect and a compositional effect of IPR institutions. In countries with weak IPR protection, firms source only low-tech components, for which imitation is irrelevant, so concentration is optimal. At intermediate IPR levels, they buy more high-tech, imitation-prone components and therefore ‘slice to protect’. Under strong IPR regimes, imitation risk is minimal and concentration is highest. Empirically, weak IPR institutions strongly predict slicing of high-tech components. |
| Keywords: | Intellectual property rights; Global value chains; Production; Technology; Imitation; Automotive industry; Fragmentation |
| JEL: | F12 F14 F21 F23 L23 L24 L25 O32 O34 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21535 |
| By: | Mark Brown; Wulong Gu; Jesse Tweedle |
| Abstract: | With rising barriers to trade with the United States, it is important to understand how Canadian firms adjust to tariffs. To provide insight, this paper examines the effects of U.S. tariffs imposed on Canadian steel and aluminum products from June 1, 2018, to May 20, 2019. Over the months tariffs were imposed, the value of tariffed steel and aluminum exports fell by about 50%, with U.S. importers paying the full cost of tariffs through higher prices. Exports of steel declined as exporters affected by tariffs responded by exiting the U.S. market and halting operations. Exports of aluminum declined as exporters affected by tariffs adjusted by reducing their exports, rather than severing supply chains by exiting the U.S. market. Across the 2017 cohort of steel and aluminum exporters affected by tariffs, gross output and employment levels were at least maintained from 2017 to 2019. Moreover, steel and aluminum producers affected by tariffs that continued to export to the United States increased investment by about 60%, which far outpaced firms that exited the U.S. market (-36% and +37% for steel and aluminum producers, respectively). Lastly, firms that left the U.S. market tended to have higher debt levels relative to those that continued, suggesting a link between the health of balance sheets and firms’ ability to continue as exporters. In the face of higher tariffs, declining trade (in value and volume) is expected. The resilience of steel and aluminum exporters is a more surprising outcome, and the lessons learned from this are more tentative given that current tariffs are higher, more uncertain and potentially more persistent. |
| Keywords: | tariffs, prices, employment, investment, firm survival |
| JEL: | J23 M21 |
| Date: | 2025–11–26 |
| URL: | https://d.repec.org/n?u=RePEc:stc:stcp8e:202501100004e |
| By: | Chahreddine Abbes; Amélie Lafrance-Cooke; Nicholas Johnston |
| Abstract: | By focusing on exits, their characteristics, patenting behaviour and the possible reasons behind exits, the paper provides a first attempt to answer the following question: What is the role of patents in firms’ exit strategies? While most exits can be the direct result of small and medium-sized enterprises’ failure to compete in a private market for various reasons, when exits involve intellectual property (IP), the situation may require thorough analysis because IP may play a double role. It can be a valuable asset to attract investors, and secure financing, therefore improving firms’ odds of survival and delaying exit (patent survival effect). On the other hand, IP can also be a very attractive asset for incumbents to acquire, accelerating exit from the market through mergers and acquisitions (patent trigger effect). Using data from Statistics Canada’s Canadian Patent Research Database and National Accounts Longitudinal Microdata File, this paper provides a detailed analysis of the role played by patents in the context of exits. The paper finds that firms that patent are more likely to be larger, to perform research and development, export their products, and be alive seven years after entry relative to businesses that do not patent. Furthermore, while the patent survival effect is estimated at a statistically significant 4.5%, the trigger effect was positive but not significant when regressing a fully specified model. |
| Keywords: | property, firms, patents |
| JEL: | J23 M21 |
| Date: | 2025–06–25 |
| URL: | https://d.repec.org/n?u=RePEc:stc:stcp8e:202500600005e |