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The Role of Foreign Networks for Trade in Services: Firm-level Evidence
Örebro University, Orebro University School of Business, Örebro University, Sweden. (Internationell ekonomi)
Örebro University, Swedish Business School at Örebro University. (Internationell ekonomi)ORCID iD: 0000-0003-0149-9598
2015 (English)Conference paper, (Other academic)
Abstract [en]

This study provides novel evidence of a positive and significant influence of firm investment into foreign networks – through the hiring of foreign-born workers in the firm – on both the propensity to export services as well as the intensity in exports. Because trade barriers are higher for services than for goods, and since trade in services is more sensitive to informal trade barriers, firm investment in access to foreign networks could in particular help to increase 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 formalizes this idea that that the world can become ‘smaller’ through firms’ strategic trade-related decisions. We investigate whether firm investment to obtain access to foreign networks impacts exports of services by estimating a fixed effects panel model on a comprehensive firm-level dataset for Sweden and looking in particular at investment in links through the hiring of immigrants. Instrumental variable estimation mitigates the endogeneity concern. In addition to the key finding, our results demonstrate that weaker export experience enhances the role of investment into foreign networks in terms of propensity to export. As an ancillary result, we find that the skill level of foreignborn workers and the time elapsed since immigration also impact the degree to which firms can utilize foreign-born personnel as an investment to gain access to networks abroad. Our results provide a new understanding of how firms can overcome trade barriers that specifically impede services by investing in foreign networks, for example, through the hiring of foreign-born personnel. In this, our study emphasizes the need for policymakers to increase labor market participation among the foreign-born population as to way to promote internationalization in terms of services exports.

Place, publisher, year, edition, pages
2015.
Keyword [en]
Networks, firm trade, services, immigrant workers, information, trust
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:oru:diva-47388OAI: oai:DiVA.org:oru-47388DiVA: diva2:893606
Conference
6th International Conference on "Economics of Global Interactions: New Perspectives on Trade, Factor Mobility and Development", Bari, Italy, September 7-8, 2015
Projects
Migration, integration och företagens globalisering
Funder
The Jan Wallander and Tom Hedelius Foundation, W2013-0425:1
Available from: 2016-01-13 Created: 2016-01-13 Last updated: 2016-01-13Bibliographically approved

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Orebro University School of Business, Örebro University, SwedenSwedish Business School at Örebro University
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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • 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