Firm‐level characteristics and the impact of COVID‐19: Examining the effects of foreign ownership and international trade

Using a large multi‐country firm‐level data set from the World Bank Enterprise Survey, we examine whether multinational corporations (MNCs) differ from domestic firms in the prevalence and size of the impact of COVID‐19 on sales. Our findings reveal significant differences between MNCs and domestic firms, especially when accounting for the interplay between foreign ownership and international trade. Exporting MNCs are significantly less likely to experience a negative sales impact; this finding is robust to controlling for firm characteristics including size, age and productivity and the use of a propensity score reweighting approach based on the likelihood that a firm was foreign owned prior to the onset of the pandemic. Regarding the impact of the pandemic on the level of sales decrease, trading MNCs experience a significantly smaller negative impact. However, MNCs with joint high levels of imports and exports sustain a larger negative effect. MNCs operating in countries and sectors characterised by a high degree of participation in international production networks are less affected by the pandemic. When controlling for the interaction between MNCs and international trade, we also find a direct positive effect of foreign ownership on the size of sales decrease, representing a liability of foreignness effect.