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Vertical Ownership and Trade: Firm-level evidence from France

Author

Listed:
  • Gaigne, Carl
  • Latouche, Karine
  • Turolla, Stephane

Abstract

In this paper, we study the impact of acquiring equity shares in intermediaries on ex- port performance. We develop a trade model with vertically linked industries where the decisions to export and to own its intermediary are endogenous that we test on French data at the firm level. We show that: forward acquisition enables manufacturers to man- age the double marginalization problem and to enjoy lower costs to foreign market access, so that the probability of exporting and export sales are higher for a firm with a par- ticipation in intermediaries. In addition, vertical ownership creates a market externality among manufacturers due to a reallocation of market shares from small firms to large firms forcing some low-productivity firms to exit from foreign markets.

Suggested Citation

  • Gaigne, Carl & Latouche, Karine & Turolla, Stephane, 2012. "Vertical Ownership and Trade: Firm-level evidence from France," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125020, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea12:125020
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    References listed on IDEAS

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    More about this item

    Keywords

    Exports; Forward integration; Heterogeneous firms; Intermediary; International Relations/Trade; F12; L22;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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