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Global Firms

Author

Listed:
  • Andrew B. Bernard
  • J. Bradford Jensen
  • Stephen J. Redding
  • Peter K. Schott

Abstract

Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now-standard heterogeneous firm model posits measure-zero firms that compete under monopolistic competition and decide whether to export to foreign markets. However, much of international trade is dominated by a few "global firms," which participate in the international economy along multiple margins and account for substantial shares of aggregate trade. We develop a new theoretical framework that allows firms to have large market shares and decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. Using US firm and trade transactions data, we provide strong evidence in support of this framework's main predictions of interdependencies and complementarities between these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics and increasing their shares of aggregate trade.

Suggested Citation

  • Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2018. "Global Firms," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 565-619, June.
  • Handle: RePEc:aea:jeclit:v:56:y:2018:i:2:p:565-619
    Note: DOI: 10.1257/jel.20160792
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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