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Production processes are fragmenting across borders with countries trading tasks rather than products. Export statistics based on value added reveal a process of vertical specialisation. Yet, what do countries do when exporting? In this article, we provide novel evidence on functional specialisation (FS) in trade. We find surprisingly large and pervasive heterogeneity in specialisation across countries. A positive (negative) correlation between GDP per capita and specialisation in R&D (fabrication) functions is documented. Specialisation in management and marketing functions is unrelated to income. We show how our approach can be easily extended to study FS in trade at the sub-national level. We argue that this is needed to better understand the potential for regional development under global integration.

A major result in the study of two-sided platforms is the strategic interdependence between the two sides of the same platform, leading to the implication that a platform can maximize its total profits by subsidizing one of its sides. We show that this result largely depends on assuming that at least one side of the market single-homes. As technology makes joining multiple platforms easier, we increasingly observe that participants on both sides of two-sided platforms multihome. The case of multihoming on both sides is mostly ignored in the literature on competition between two-sided platforms. We help to fill this gap by developing a model for platform competition in a differentiated setting (a Hotelling line), which is similar to other models in the literature but focuses on the case where at least some agents on each side multihome. We show that when both sides in a platform market multihome, the strategic interdependence between the two sides of the same platform will diminish or even disappear. Our analysis suggests that the common strategic advice to subsidize one side in order to maximize total profits may be limited or even incorrect when both sides multihome, which is an important caveat given the increasing prevalence of multihoming in platform markets. This paper was accepted by Joshua Gans, business strategy .

This paper links the sharp drop in US manufacturing employment after 2000 to a change in US trade policy that eliminated potential tariff increases on Chinese imports. Industries more exposed to the change experience greater employment loss, increased imports from China, and higher entry by US importers and foreign-owned Chinese exporters. At the plant level, shifts toward less labor-intensive production and exposure to the policy via input-output linkages also contribute to the decline in employment. Results are robust to other potential explanations of employment loss, and there is no similar reaction in the European Union, where policy did not change.

What can MNEs learn from the COVID-19 pandemic? IB scholars have provided ample insights into this question with many focusing on risk management. Complementing these insights, we argue that MNEs should also consider the long-lasting effect that COVID-19, inter alia, had on the institutional logic underlying globalization. The U.S. and its allies have redefined their logic from pursuing cost-reduction to building partnerships based on shared value, aiming to substitute China’s role in the world economy. The geopolitical pressure for decoupling from China is the source of ‘new’ vulnerability of globalization. Such pressure is counteracted by economic rationality, creating unsettled priority between the globalization and deglobalization logics at the macro-level institutional space. Combining both risk-management and institutional logic perspectives, we develop a more comprehensive framework on how MNEs should respond to these challenges. This paper contributes to the debate regarding the impact of COVID-19 on globalization, suggesting that neither globalization nor deglobalization logics will prevail in the short run, and IB will likely be more fractured in the long run, based on not only geographic but also ideological and value propinquity. In strategic sectors, the balance will shift toward bifurcation while in others the balance will shift toward the globalization logic.

This paper examines the importance of buyer-supplier relationships for firm performance. We develop a model in which firms outsource tasks and search for suppliers. Lower search and outsourcing costs lead firms to search more and find better suppliers, which in turn drives down marginal costs. We test the theory by exploiting the opening of a high-speed train line in Japan, which lowered the cost of passenger travel but left shipping costs unchanged. Using an exhaustive data set on firms’ buyer-seller linkages, we find significant improvements in firm performance as well as creation of buyer-seller links, consistent with the model.

Accelerators aim to help nascent companies reach successful outcomes by providing capital, enabling industry connections, and increasing exposure to investors. Critically, however, accelerators also provide informative signals to founders about the probability of success. Founders use this information to decide whether to continue or shut down. To better understand these issues, I provide a model of accelerator participation and performance and then test empirical predictions from the model using a novel data set of approximately 900 accelerator companies across 13 accelerators and 900 matched nonaccelerator companies. I find that, through accelerator feedback effects, accelerator companies close down earlier and more often, raise less money conditional on closing, and appear to be more efficient investments compared with non-accelerator companies. Additional analysis using a separate sample of rejected accelerator applicants further supports these findings. These results suggest that accelerators help resolve uncertainty around company quality sooner, allowing founders to make funding and exit decisions accordingly. This paper was accepted by Ashish Arora, entrepreneurship and innovation.

The nature of the relationship between employers and employees has been changing over the past three decades, with firms increasingly relying on contractors, temp agencies, and franchises rather than hiring employees directly. We investigate the impact of this transformation on the wage structure by following jobs that are moved outside the boundary of lead employers to contracting firms. We develop a new method for identifying outsourcing of food, cleaning, security, and logistics services in administrative data using the universe of social security records in Germany. We document a dramatic growth of domestic outsourcing in Germany since the early 1990s. Event-study analyses show that wages in outsourced jobs fall by approximately 10–15% relative to similar jobs that are not outsourced. We find evidence that the wage losses associated with outsourcing stem from a loss of firm-specific rents, suggesting that labor cost savings are an important reason firms choose to contract out these services. Finally, we tie the increase in outsourcing activity to broader changes in the German wage structure, in particular showing that outsourcing of cleaning, security, and logistics services alone accounts for around 9% of the increase in German wage inequality since the 1980s.

Motivated by empirical evidence I uncover on the dynamics of French firms' exports, I offer a novel theory of trade frictions. Firms export only into markets where they have a contact. They search directly for new trading partners, but also use their existing network of contacts to search remotely for new partners. I characterize the dynamic formation of an international network of exporters in this model. Structurally, I estimate this model on French data and confirm its predictions regarding the distribution of the number of foreign markets accessed by exporters and the geographic distribution of exports.

Transboundary pollution poses a major threat to environment and human health. An effective approach to addressing this problem is the adoption of long-term abatement technology; however, many developing regions are lacking in related technologies that can be acquired by licensing from developed regions. This study focuses on a differential game model of transboundary pollution between two asymmetric regions, one of which possesses advanced abatement technology that can reduce the abatement cost and licenses this technology to the other region by royalty or fixed-fee licensing. We characterize the equilibrium decisions in the regions and find that fixed-fee licensing is superior to royalty licensing from the viewpoint of both regions. The reason is that under fixed-fee licensing, the regions can gain improved incremental revenues and incur reduced environmental damage. Subsequently, we analyze the steady-state equilibrium behaviors and the effects of parameters on the licensing performance. The analysis indicates that the myopic view of the regions leads to short-term revenue maximization, resulting in an increase in total pollution stock. Moreover, a high level of abatement technology or emission tax prompts the licensee region to choose fixed-fee approach, which is beneficial both economically and environmentally for two regions.

International joint ventures (IJVs) are an important type of international strategic alliance (ISA) and have been studied by scholars for decades, resulting in a plethora of empirical studies, publications, and reviews, yet an inadequate accumulation of knowledge exists, as a closer look reveals. Much more than providing a summary and critical assessment of past contributions, this paper develops an expansive research agenda based upon a deep understanding of past research and comprehensive frameworks that distill this research. We identify a number of research opportunities that would not only advance IJV research but also closely related literatures and disciplines such as ISAs, theories of the multinational firm, international business research, and strategic management.