Intra-firm Networks during the COVID-19 Pandemic

This study empirically investigates how the severity of the COVID-19 pandemic, as measured by mobility restriction measures, affected the quarterly performance of Japanese overseas affiliates, mainly from the perspective of sales, spanning from 2020 to 2022. In particular, we highlight the role of intra-firm networks, specifically the presence of nearby affiliates within the same parent company, in mitigating the adverse effects of COVID-19. Our major findings can be summarized as follows. First, the negative impact of local mobility-restricting measures was much larger for total sales and investment than for employment, especially during the initial phase of the pandemic. Although the negative effect was significantly larger for total sales, it took a longer time for investment to recover. Second, on average, affiliates with sibling affiliates in the same region did not necessarily play a role in mitigating the adverse effects and experienced a greater negative effect from local restriction measures in some cases. Third, such a negative effect was much smaller or disappeared for affiliates with sibling affiliates that are located in nearby countries experiencing less restrictive measures, particularly in the initial period of the shock.