The Life-Cycle Dynamics of Exporters and Multinational Firms

Gumpert, Anna M.; Li, Haishi; Moxnes, Andreas; Ramondo, Natalia; Tintelnot, Felix

doi:10.3386/w24013

Cited by 9 publications

(5 citation statements)

References 44 publications

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“…Since the BEA data do not include information about parent exports by destination market, we are not able to address this question directly. Gumpert et al (2018), however, report that, for Norway and France, the difference in growth profiles for MNEs with previous export experience into a market and those without it is not significant, except for the first year of the affiliate's life.…”

Section: Results Inmentioning

confidence: 89%

Multinational Expansion in Time and Space

Garetto¹,

Oldenski²,

Ramondo³

2019

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This paper studies the expansion patterns of the multinational enterprise (MNE) in time and space. Using a long panel of US MNEs, we document that: MNE affiliates grow by exporting to new markets; the activities of MNE affiliates persist during the affiliate's life, usually starting with sales to their host market and eventually expanding to export markets; and MNE affiliates' entry into new locations does not depend on the location of preexisting affiliates. Informed by these facts, we develop a multi-country quantitative dynamic model of the MNE that features heterogeneity in firm-level productivity, persistent aggregate shocks, and a rich structure of costs that affect MNE expansion. Importantly, MNE affiliates can decouple their locations of production and sales, and endogenously choose to enter or exit the host and the export markets.We introduce a compound option formulation that allows us to capture in a tractable way the rich heterogeneity that is observed in the data and that is necessary for quantitative analysis.Using the calibrated model, our quantitative application to Brexit reveals that export platforms are important for understanding the reallocation of MNE activity in time and space, and that the nature of the frictions to MNE activities matters for aggregate firm dynamics.JEL Codes: F1. Yeaple for very helpful comments in more than one occasion. We have also benefited from comments from 1 affiliates-in other words, the pattern of affiliates' entry does not display "extended gravity", in stark contrast with the facts that Morales et al. (2018) document for exporters.Guided by these facts, we build a multi-country dynamic model of MNE expansion. Home-based firms decide whether, when, and where to open foreign affiliates. Affiliates, in turn, can sell both to their host market and to any other market. Affiliate operations, both in the host and in the export markets, are subject to sunk, fixed, and variable costs. The MNE decisions of whether to set up an affiliate in a market, and whether to export from it, are shaped by the interaction of firm-specific characteristics, persistent aggregate productivity and demand shocks, and the array of MNE costs.Our model's structure is based on two main assumptions. First, guided by the observation that almost all affiliates in the data have some horizontal sales at birth, we assume that firms that decide to do Foreign Direct Investment (FDI) must first set up an affiliate and sell to the local market, and only then can they consider exporting from that affiliate. Since the model is set up in continuous time, the decision of opening an affiliate and the decision of exporting from it can be made virtually simultaneously, generating affiliates with exclusively horizontal sales and affiliates with both horizontal and export sales at birth, as in the data. Second, consistent with the lack of extended gravity in the data, we assume that the decision of opening an affiliate -and eventually exporting from it-is independent across markets. For instance, a firm's decisi...

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Section: Results Inmentioning

confidence: 89%

Multinational Expansion in Time and Space

Garetto¹,

Oldenski²,

Ramondo³

2019

Self Cite

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“…For expositional ease, we will refer to both kinds of data as being made up of firms. 3 We focus on the export decision, as research on this margin is most developed, but there is a nascent literature on the dynamics of multinationals, importing, and the interactions of these decisions (Kasahara & Lapham 2013, Fillat & Garetto 2015, Gumpert et al 2018, Imura 2019). 4 When comparing Colombia and the United States, we need to adjust for data coverage.…”

Section: Cross-sectional Momentsmentioning

confidence: 99%

Firm Dynamics and Trade

2021

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We review the literature that studies the dynamics of firms in foreign markets, at both the intensive and extensive margins, and their aggregate implications. We first summarize a set of micro facts on exporter entry, expansion, contraction, and exit and several macro facts about the response of aggregate trade flows to trade-policy and business-cycle shocks. We then present the canonical model developed to account for these facts and discuss its connection to the empirical evidence. We show how three model features—future uncertain profits, an investment in market access, and high depreciation of that access upon exit—generate transition dynamics and long-run aggregate outcomes from a cut in tariffs. The model and its extensions contribute to our understanding of trade integration and the evolution of future trade barriers. We discuss the key challenges faced by the canonical model, its possible extensions, and applications of the framework to recent global events. Expected final online publication date for the Annual Review of Economics, Volume 13 is August 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

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“…The trade relationships mature after a few years when exporters have gained the trust and confidence of the importers. The other factor that contributes to small duration of export spells is the fact that the cost of existing the export market is relatively low (Gumpert, Moxnes, Ramondo & Tintelnot, ).…”

Section: Empirical Strategymentioning

confidence: 99%

China's export tax rebate and the duration of firm export spells

Anwar

Jin

et al. 2018

Review Development Economics

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Using a survival analysis technique, this paper investigates the impact of the export tax rebate (ETR) on duration of the firm, country/destination, and product (F–C–P)‐level export spells in China. Empirical analysis of a large dataset that covers the 2001 to 2013 period shows that the effect of ETR on duration of export spells of Chinese firms is large and statistically significant. A 1 percentage point increase in ETR rate increases the duration rate of F–C–P relationships by 23.2%. Furthermore, compared with the high‐tech firms, low‐tech and middle‐tech firms experience a larger increase in the duration of export spells in response to increase in China's ETR. Firm ownership‐based analysis shows that an increase in ETR leads to a larger increase in export spells of privately owned firms than the export spells of state‐ and foreign‐owned firms. These findings have important policy implications for the design and implementation of China's ETR policy.

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The Life-Cycle Dynamics of Exporters and Multinational Firms

Cited by 9 publications

References 44 publications

Multinational Expansion in Time and Space

Multinational Expansion in Time and Space

Firm Dynamics and Trade

China's export tax rebate and the duration of firm export spells

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