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Importers, Exporters and Multinationals: Exploring the Hierarchy of International Linkages

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Abstract

The purpose of this paper is to empirically explore two dimensions of the firm hierarchy of international market-specific linkages, using data on Swedish manufacturing firms from 1997 to 2007. First, we investigate the productivity ordering with respect to three international linkages; importing, exporting and investing abroad. Second, we explore whether differences in the productivity ordering across industries correlates with industry and country characteristics. Our findings support a general productivity hierarchy from importing to exporting and from exporting to investing abroad, as well as from a low to a high number of linkages (measuring the complexity of firms’ international linkages). However, an industry-by-industry examination shows that the hierarchical structure is only generally upheld when it comes to the number of international linkages, while the ordering of import, export and investment linkages does not exhibit the same regularity across industries. Extending the analysis, we find that the lack of a hierarchical structure is more likely in industries focusing on larger and less distant markets.

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Notes

  1. See Greenaway and Kneller (2007) for a survey of the early literature in this research field.

  2. A model with similar features is provided by Jean (2002).

  3. See, among others, Kasahara and Rodrigue (2008) and Kugler and Verhooven (2009).

  4. See, among others, Clerides et al. (1998) and Holmes and Schmitz (2001).

  5. In line with these results, Damijan and Kostevc (2010) explore learning from trade and they find support for a clear sequencing from imports (and innovation) to exports (and more innovation).

  6. The rationale behind the higher sunk costs of FDI is that this activity requires firms to streamline the production process under imperfect contracting conditions (as parties can alter unspecified details of a production agreement etc.).

  7. Contrasting evidence in previous studies has been attributed to sample selection bias (Corcos et al. 2013).

  8. Notice that productivity may also affect how FDI is conducted. For example, Cieślik and Ryan (2012) examine how productivity influences the affiliate ownership choice, focusing on various types of joint ventures

  9. For instance, multinationals may more easily internalize exchange-rates fluctuations (see Greenaway et al. 2007). See also Broll and Wong (2006) for a model of how exchange-rate uncertainty affects the capital structure of a multinational firm.

  10. Provided by the Swedish Agency for Growth Policy Analysis under a strict confidentiality agreement.

  11. We used the opreg command in Stata in order to estimate TFP, using investments as a proxy. Data on capital stocks and value added, which are reported in thousand SEK, are adjusted by industrial producer price indices provided by Statistics Sweden.

  12. These results are available from the authors upon request.

  13. For example, the exporter premium ranges between 0.10 and 0.16 in Andersson et al.’s (2008) investigation of the Swedish manufacturing industry.

  14. These results are available from the authors upon request.

  15. Notice that the large population of around 9 million firm-market-time observations and the random selection of our sample ensures that we have an even distribution across different markets (i.e. all countries are included and no market is overrepresented).

  16. See Grubert (2003) and Azémar and Corcos (2009).

  17. Data on capital stocks and sales, which is reported in thousand SEK, are adjusted by industry producer price indices provided by Statistics Sweden.

  18. GDP data is reported in million USD, population data in million inhabitants, and bilateral distance data in kilometers.

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Acknowledgments

Financial support from the Jan. Wallander and Tom Hedelius Foundation (grant nr. P2009-0118:1) is gratefully acknowledged. The authors want to thank Zouheir El-Sahli, Ari Kokko, Fredrik Sjöholm and Martin Streiborny as well as seminar participants at Lund Seminar Series in International Economics and conference participants at SNEE in Mölle, 2013, and DIEW in Århus, 2015, for valuable comments. In addition, we thank two anonymous referees for helpful suggestions and Hans Carlsson for his advice.

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Authors and Affiliations

  1. Department of Economics, Lund University, Box 7082, 22007, Lund, Sweden

    Joakim Gullstrand & Karin Olofsdotter

  2. Institute for European Studies, University of Malta, Msida, 2080, Malta

    Susanna Thede

Authors
  1. Joakim Gullstrand
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  2. Karin Olofsdotter
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  3. Susanna Thede
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Correspondence to Susanna Thede.

Appendix

Appendix

Table 8 Descriptive figures across industries
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Table 9 Foreign market characteristics
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Gullstrand, J., Olofsdotter, K. & Thede, S. Importers, Exporters and Multinationals: Exploring the Hierarchy of International Linkages. Open Econ Rev 27, 495–514 (2016). https://doi.org/10.1007/s11079-015-9383-7

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