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Risk or Resilience? The Role of Trade Integration and Foreign Ownership for the Survival of German Enterprises during the Crisis 2008-2010

  • Wagner, Joachim

    ()

    (Leuphana University Luneburg & Centre of Excellence for Science (CESIS))

  • Gelübcke, John P. Weche

    ()

    (Leuphana University Luneburg, Germany)

This is the first study of the link between internationalization and firm survival during the 2008/2009 crisis in Germany, a country which was hit relatively lightly compared to other countries. Moreover, it is the first study which looks at the role of importing, exporting and FDI simultaneously in the context of a global economic recession. We use a tailor-made representative dataset that covers all enterprises from the manufacturing sector with at least 20 employees. Our most striking result is to demonstrate the disadvantage of exporting for the chances of survival of a firm during the crisis in western Germany. Importing instead reveals a positive correlation with survival and firms that both export and import do not show a different exit risk relative to non-traders. A plausible explanation is that in a global recession, deteriorating markets abroad cause demand losses for exporters and improved conditions on factor markets which result in an advantage for firms sourcing from factor markets abroad. Two-way traders do not show a link with exit risk, supporting the idea that they were able to outweigh their losses from exporting with their gains from importing, in what could be called an export{import hedge. Furthermore, we cannot support the hypothesis that foreign multinationals are more volatile during times of economic crisis.

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Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 340.

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Length: 24 pages
Date of creation: 18 Dec 2013
Date of revision:
Handle: RePEc:hhs:cesisp:0340
Contact details of provider: Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
Web page: http://www.infra.kth.se/cesis/
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  2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  3. Wagner, Joachim & Weche Gelübcke, John Philipp, 2011. "Foreign Ownership and Firm Survival: First Evidence for Enterprises in Germany," IZA Discussion Papers 6207, Institute for the Study of Labor (IZA).
  4. Alexander Vogel & Stefan Dittrich, 2008. "European Data Watch: The German Turnover Tax Statistics Panel," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 128(4), pages 661-670.
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  18. Adalgiso Amendola & Anna Maria Ferragina & Rosanna Pittiglio & Filippo Reganati, 2012. "Are exporters and multinational firms more resilient over a crisis? First evidence for manufacturing enterprises in Italy," Economics Bulletin, AccessEcon, vol. 32(3), pages 1914-1926.
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  22. Jovanovic, B., 1993. "The Diversification of Production," Working Papers 93-11, C.V. Starr Center for Applied Economics, New York University.
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  24. Vogel, Alexander & Wagner, Joachim, 2008. "Higher Productivity in Importing German Manufacturing Firms: Self-Selection, Learning from Importing, or Both?," IZA Discussion Papers 3854, Institute for the Study of Labor (IZA).
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