Do multinational retailers affect the export competitiveness of host countries?

Conference object, Research English OPEN
Cheptea, Angela (2014)
  • Publisher: Tübingen: Institut für Angewandte Wirtschaftsforschung (IAW)
  • Subject: Economies et finances | exportation | Microstructure des marchés | multinational retailers;export competitiveness;productivity gains;transnational networks;intermediaries | export competitiveness | réseau transnational | F12 | F23 | transnational networks | intermédiation | compétitivité | F14 | entreprise multinationale | Q17 | gain de productivité | Economies and finances | intermediaries | multinational retailers | productivity gains | Trading and Market Microstructure | détaillant
    • ddc: ddc:330

The paper investigates how the overseas activity of multinational retailers (MRs) affects the global export patters of host country firms. Recent empirical work testifies that the entry of foreign retailers leads to a productivity upgrade in the domestic upstream sectors. Combined with the main result of the new new international trade theory on firm heterogeneity, an increase in the export capacity of local firms should also follow. The current paper establishes a connection between these empirically identified effects and the new theory of international trade with heterogeneous firms and intermediaries. Two mechanisms through which MRs affect producing firms in their host countries are analyzed. First, the arrival of MRs leads to a productivity upgrade, both at the industry level, by forcing least productive firms to exit, and at the firm-level, by providing access to improved technology and know-how for retailers' suppliers in these markets. Second, MRs have the capacity to reduce the local firms' export costs to destination countries where they invest, by matching their outlets in one country with their suppliers from another country, or by sharing their transport and distribution infrastructures and increased knowledge on foreign markets with local suppliers. The first mechanism generates an increase in the overall export capacity of local firms to any destination, while the second leads to an increase in trade only between countries hosting the same MR. The two mechanisms are analyzed empirically using data on the international activity of over 200 of the world's leading MRs, and evidence is found for both effects. The second mechanism is absent for exports to the retailer's origin country, supporting the view that countries hosting a foreign retailer export more to other countries within the retailer's overseas network, but not to its country of origin. Retail sector FDI also increases the product diversity of exported products to all destinations combined, but a product ``cannibalization''effect is found for exports to the retailer's origin country.
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