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How Do U.S. Firms Withstand Foreign Industrial Policies?

Author

Listed:
  • Xiao Cen
  • Vyacheslav Fos
  • Wei Jiang

Abstract

China’s industrial policies (“Five-Year Plans”) displace U.S. production/employment and heighten plant closures in the same industries as those targeted by the policies in China. The impact was not anticipated by the stock market, but U.S. companies in the "treated industries" suffer a valuation loss afterwards. Firms shift production to upstream or downstream industries benefiting from the boost, or offshore to government-endorsed industries in China. Such within-firm adjustments offset the direct impact. U.S. firms are better able to withstand foreign government interventions provided that they enjoy flexibility, including preexisting business toeholds in the "beneficiary" industries, financial access, and labor fluidity.

Suggested Citation

  • Xiao Cen & Vyacheslav Fos & Wei Jiang, 2024. "How Do U.S. Firms Withstand Foreign Industrial Policies?," NBER Working Papers 32411, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32411
    Note: CF
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    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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