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Exporting, Global Sourcing, and Multinational Activity: Theory and Evidence from the United States

(joint with Pol Antràs, Teresa Fort, and Felix Tintelnot)

Forthcoming at Review of Economics and Statistics

Abstract: Multinational firms (MNEs) dominate trade flows, yet their global production decisions are often ignored in firm-level studies of exporting and importing. Using newly merged data on US firms’ trade and multinational activity by country, we show that MNEs are more likely to trade not only with countries in which they have affiliates, but also with other countries within their affiliates’ region. We rationalize these patterns with a new source of firm-level scale economies that arises when country-specific fixed costs to source from, or sell in, a market are shared across all the firm’s plants. These shared fixed costs create interdependencies between a firm’s production and trade locations that generate third-market responses to policy changes.

Coverage: Becker Friedman Institute

Export-Platform FDI: Cannibalization or Complementarity?

(joint with Pol Antràs, Teresa Fort, and Felix Tintelnot)

AEA Papers and Proceedings 2024, long version (pdf)

Abstract: We develop a model of export-platform foreign direct investment (FDI) in which final goods are produced only with labor and there are no fixed costs of exporting. We derive a simple condition that determines whether an MNE’s plants are substitutes or complements. This condition is shaped by the relative size of (i) the cross-firm elasticity of demand the MNE faces for its goods and (ii) the within-firm elasticity of labor substitution across the MNE’s plants. In two extensions of the model, we show that this complementarity is enhanced by firm-level (rather than plant-level) fixed costs of exporting and of sourcing inputs.

Working Papers

Creative Construction: Knowledge Sharing and Cooperation Between Firms, June 2024

Abstract: Knowledge flows among firms are often assumed to take the form of involuntary spillovers, which are commonly measured by patent citations. I show that citations are highly concentrated and primarily come from business partners. I provide empirical evidence suggesting that citations measure intentional knowledge transfers between collaborating firms rather than involuntary spillovers. The concentration of citations has increased since 2000, indicating more selective knowledge sharing among partners. I develop a theory explaining how market forces affect knowledge flows. Technologies consist of multiple knowledge components, each of which can be either patented or kept secret. Patenting facilitates the division of labor among business partners but discloses information to competitors. Higher competition leads to greater reliance on secrecy, which impedes contractible knowledge sharing with partners and makes it more selective. Using data on trade secret litigation and import competition from China, I provide evidence supporting the predictions of the model.

Coverage: The Visible Hand (Episode 30), Faculti

Previous title: “Creative Construction: Knowledge Sharing in Production Networks”

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