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Vertical ownership and export performance: firm-level evidence from France

Carl Gaigne, Karine Latouche () and Stéphane Turolla ()

No 15-07, Working Papers SMART - LERECO from INRA UMR SMART-LERECO

Abstract: This paper examines whether ownership arrangements between manufacturers and intermediaries improve the export performance of the former. We develop a theoretical model of trade with vertically linked industries whereby upstream manufacturers compete in export markets and may decide to acquire ownership stakes in an intermediary. The model highlights how more productive firms succeed in managing the double marginalization problem and in reducing the costs of exporting through forward acquisition. On the flip side, we find that vertical ownership creates a market externality among manufacturers due to the reallocation of market shares from small firms to large firms, forcing some low-productivity firms to exit foreign markets. Predictions from the model are tested using firm-level data on the French agri-food sector. The results confirm the model predictions and reveal that the benefits from forward acquisitions could be quite large.

Keywords: forward integration; trade intermediation; export decision; heterogeneous firms; markups (search for similar items in EconPapers)
JEL-codes: F12 L22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-int
Date: 2015
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