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Multinational networks and trade participation

Author

Listed:
  • Paola Conconi

    (University of Oxford, CEP, CESifo and CEPR)

  • Fabrizio Leone

    (Université Libre de Bruxelles (ECARES) and CESifo.)

  • Glenn Magerman

    (Université Libre de Bruxelles (ECARES), CESifo and CEPR)

  • Catherine Thomas

    (London School of Economics, CEP, CESifo and CEPR)

Abstract

This paper provides a novel explanation for the dominant role of multinational corporations (MNCs) in international trade: after being acquired by an MNC, firms face lower trade frictions in and around the network of countries in which their parent has a presence. We provide a model of firms’ export and import choices that isolates “MNC network effects” from other channels through which multinational ownership can affect trade participation. We bring the model to the data by combining rich information on the universe of Belgian firms and on MNCs’ global networks. We find that acquired firms are more likely to start trading with countries that belong to—or that are exogenously added to—their parental network. Network effects extend beyond MNC boundaries and dominate traditional firm-level channels in explaining affiliates’ entry in new markets. Our analysis suggests that the growth rate of acquired firms is more than twice as large as that of the median domestic firm due to MNC network effects.

Suggested Citation

  • Paola Conconi & Fabrizio Leone & Glenn Magerman & Catherine Thomas, 2024. "Multinational networks and trade participation," Working Paper Research 456, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:202409-456
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    File URL: https://www.nbb.be/en/articles/multinational-networks-and-trade-participation
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    More about this item

    Keywords

    Multinational Firms; International Business; Firm Behavior: Empirical Analysis.s;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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