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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

  • Joachim Wagner

    ()

    (Leuphana University Lueneburg, Germany)

  • John P. Weche Geluebcke

    ()

    (Leuphana University Lueneburg, 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 University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 288.

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Length: 28 pages
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:lue:wpaper:288
Contact details of provider: Web page: http://leuphana.de/institute/ivwl.html

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  1. Wagner, Joachim, 2011. "International Trade and Firm Performance: A Survey of Empirical Studies since 2006," IZA Discussion Papers 5916, Institute for the Study of Labor (IZA).
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  12. Michael Konold, 2007. "European Data Watch: New possibilities for economic research through integration of establishment-level panel data of German official statistics," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(2), pages 321-334.
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  18. Jörn Kleinert & Julien Martin & Farid Toubal, 2012. "The few leading the many: foreign affiliates and business cycle comovement," Globalization and Monetary Policy Institute Working Paper 116, Federal Reserve Bank of Dallas.
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  22. Joachim Wagner & John Philipp Weche Gelübcke, 2012. "Foreign Ownership and Firm Survival: First Evidence for Enterprises in Germany," Economie Internationale, CEPII research center, issue 132, pages 117-139.
  23. Harald Strotmann, 2007. "Entrepreneurial Survival," Small Business Economics, Springer, vol. 28(1), pages 87-104, January.
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  27. Alexander Vogel & Stefan Dittrich, 2008. "The German turnover tax statistics panel," Working Paper Series in Economics 92, University of Lüneburg, Institute of Economics.
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