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on International Activities of Firms |
| By: | Giordano Mion; Joana Silva |
| Abstract: | We examine how firms adjust production and technology in response to exogenous trade shocks. We develop a model that distinguishes revenue TFP from quantity TFP and embeds skill upgrading in technology choices. Firms respond to trade shocks by adjusting their quantity-quality trade-off and skill composition. These decisions impact firms’ quantity and revenue TFP, marginal costs, prices, and markups. Using detailed worker-firm-product data from Brazil, we show how trade shocks, instrumented by exogenous changes in exchange rates, GDP, and tariffs, affect margins. Results suggest fundamentally different firm responses to export and import changes: exports primarily induce upgrading in skills and product quality, whereas imports drive stronger efficiency and quantity-productivity gains. |
| Keywords: | exports, imports, shocks, skill upgrading, quality, technology, quantity TFP, revenue TFP, markups |
| JEL: | F61 F14 D24 L11 L25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12702 |
| By: | Banri ITO; Naoto JINJI; Megumi NAOI |
| Abstract: | This paper studies how rising economic-security concerns shape firms’ global operations—imports, exports, and foreign direct investment. We combine an original survey targeting Japanese manufacturing firms with firm-level data to identify correlates of three responses: (i) supplier switching in foreign sourcing, (ii) export-control adjustments (tightened compliance, destination changes, or suspension), and (iii) revisions to outward and inward investment (cancellation, equity reduction, or withdrawal/divestment). Research and development-intensive firms, firms handling export-controlled products, and firms with greater dependence on China were more likely to engage in these responses. Yet determinants differ across domains. Supplier switching is more likely for upstream firms with higher North American export exposure, suggesting demand-side pressures propagate upstream. Export-control responses depend strongly on implementation capacity, proxied by the scale of international business functions and use of government information support. Investment-related revisions are rare but appear when technological/regulatory risks overlap with geopolitical risks in today’s policy environment. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:eti:rdpsjp:26026 |
| By: | Björn Thor Arnarson; Magnus Tolum Buus; Andreas Moxnes; Jakob Roland Munch; Chong Xiang |
| 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. |
| Keywords: | supply chains, global value chains, outsourcing, scale economies, labor specialization, labor productivity, production networks |
| JEL: | F10 F12 F16 D24 L11 L25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12710 |
| By: | Kossi Messanh Agbekponou; Iaria Fusacchia |
| Abstract: | Global valuechainshavemadefirmboundarydecisionscentraltoperformance, yet their implicationsforexportpricesandshocktransmissionremainpoorlyunderstood. Wedevelopaframeworkinwhichverticalintegrationandproductivityjointlyshape pricing andpass-throughviacostsandmarkupsunderNash-in-Nashbargaining.Inte- gration eliminatesdoublemarginalizationbutintroducesorganizationalcostfrictions, while productivityaffectsbothcostsandorganizationalchoices, generatingacounter- intuitivesortinginwhichlow-productivityfirmsintegrateandhigh-productivityfirms outsource. UsingFrenchcustomsdatamatchedtoAMADEUSbalance-sheetinfor- mation foragri-foodfirms(2002–2017), andaninstrumental-variablestrategybasedon exogenous foreignshocks, wefindthatintegrationreducesexportpricesmainlythrough cumulativemarkupcompression, whileproductivitylowerspricesviacostsbutincreases markups throughsorting.Shocktransmissionisheterogeneous:non-integratedfirms adjust throughmarkups, integratedfirmsthroughcosts, andproductivitydampensboth channels.Pass-throughthusemergesasanequilibriumoutcomeoffirmorganization and productivity. |
| Keywords: | Global Value Chains, Vertical Integration, Bargaining Power, Pass-through, Firm Competitiveness |
| JEL: | D21 D22 D43 F12 F14 L11 L22 L23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:rtr:wpaper:0293 |
| By: | Peter Eppinger; Bohdan Kukharskyy; Alireza Naghavi; Gianmarco I. P. Ottaviano |
| Abstract: | We examine how firms strategically slice up global production processes to protect proprietary know-how. 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, multinational firms |
| JEL: | F12 F14 F21 F23 L23 L24 L25 O32 O34 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12694 |
| By: | Huang, Hanwei; Manova, Kalina Bojidarova; Perello Perez, Oscar Ignacio; Pischz, Frank |
| Abstract: | How do global production networks and market structure interact to shape the welfare effects of trade and competition policy? We develop a model with two-sided firm heterogeneity, matching frictions, and imperfect supplier competition. More productive buyers match with more suppliers, inducing tougher competition among them, lower input costs, and higher profits. Entry upstream thus benefits primarily high-productivity buyers, while lower trade or matching costs favor mid-productivity buyers. Reduced-form evidence confirms that larger French and Chilean firms import higher quantities at lower prices as more Chinese suppliers enter, and that suppliers charge diversified buyers lower markups. We estimate the model by adapting recent methods for combinatorial, discrete-choice problems. Counterfactuals reveal that the interaction of endogenous networks and markups significantly amplifies the gains from policies that facilitate supplier entry or firm matching, as well as from modern trade agreements that combine trade cost cuts with such policies. |
| Keywords: | Production networks;Matching frictions;Imperfect competition;Gains from trade;Trade;Competition policy |
| JEL: | D24 F10 F12 F14 L11 L22 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14594 |