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The Role of Foreign Networks for Trade in Services: Firm-Level Evidence
Lunds universitet.
Örebro University, Swedish Business School at Örebro University.ORCID iD: 0000-0003-0149-9598
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This study provides novel evidence of a positive and significant influence of firm investment into foreignnetworks – through the hiring of foreign-born workers in the firm – on both the propensity to export services as wellas the intensity in exports. Because trade barriers are higher for services than for goods, and since trade in services ismore sensitive to informal trade barriers, firm investment in access to foreign networks could in particular help toincrease services exports. Investment in foreign links could benefit the overall access in the same cluster of firms,which, however, lowers the incentive for the individual firm to invest in such linkages itself. This study formalizesthis idea that that the world can become ‘smaller’ through firms’ strategic trade-related decisions. We investigatewhether firm investment to obtain access to foreign networks impacts exports of services by estimating a fixedeffects panel model on a comprehensive firm-level dataset for Sweden and looking in particular at investment inlinks through the hiring of immigrants. Instrumental variable estimation mitigates the endogeneity concern. Inaddition to the key finding, our results demonstrate that weaker export experience enhances the role of investmentinto foreign networks in terms of propensity to export. As an ancillary result, we find that the skill level of foreignbornworkers and the time elapsed since immigration also impact the degree to which firms can utilize foreign-bornpersonnel as an investment to gain access to networks abroad. Our results provide a new understanding of how firmscan overcome trade barriers that specifically impede services by investing in foreign networks, for example, throughthe hiring of foreign-born personnel. In this, our study emphasizes the need for policymakers to increase labormarket participation among the foreign-born population as to way to promote internationalization in terms ofservices exports.

Keyword [en]
Networks, firm trade, services, immigrant workers, information, trust
National Category
Economics
Identifiers
URN: urn:nbn:se:oru:diva-38680OAI: oai:DiVA.org:oru-38680DiVA: diva2:763961
Funder
The Jan Wallander and Tom Hedelius Foundation
Note

Entreprenörskapsforums Working Paper nr 27

Available from: 2014-11-17 Created: 2014-11-17 Last updated: 2017-10-17Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf