NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Resident Networks and Firm Trade

Lauren Cohen, Umit G. Gurun, Christopher J. Malloy

NBER Working Paper No. 18312
Issued in August 2012
NBER Program(s):   AP   ITI

We demonstrate that simply by using the ethnic makeup surrounding a firm's location, we can predict, on average, which trade links are valuable for firms. Using customs and port authority data on the international shipments of all U.S. publicly-traded firms, we show that firms are significantly more likely to trade with countries that have a strong resident population near their firm headquarters. We use the formation of World War II Japanese Internment Camps to isolate exogenous shocks to local ethnic populations, and identify a causal link between local networks and firm trade links. Firms that exploit their local networks (strategic traders) see significant increases in future sales growth and profitability, and outperform other importers and exporters by 5%-7% per year in risk-adjusted stock returns. In sum, our results document a surprisingly large impact of immigrants' economic role as conduits of information for firms in their new countries.

download in pdf format
   (308 K)

email paper

This paper is available as PDF (308 K) or via email.

This paper was revised on April 18, 2013

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18312

Users who downloaded this paper also downloaded these:
Gordon w18315 Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds
Blonigen, Fontagne, Sly, and Toubal w18414 Cherries for Sale: Export Networks and the Incidence of Cross-Border M&A
Kennan w18307 Open Borders
Feenstra and Romalis w18314 International Prices and Endogenous Quality
Limão and Maggi w18703 Uncertainty and Trade Agreements
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us