In addition to firm and industry characteristics, the heterogeneity of foreign direct investment (FDI) has to be taken into account when analyzing the determinants of outward FDI. We combine two firm-specific datasets on German firms with subsidiaries and joint ventures in the Czech Republic,...

This paper uses an oligopoly model with heterogeneous firms to examine how an industry adjusts to rising import competition. The model predicts that in the short run the least efficient firms in the industry become inactive, surviving firms face a fall in output, mark-ups and profits, and the...

We use unique plant-level data to study the link between the local availability of services and the decision of manufacturing firms to source materials from abroad. To guide our empirical analysis we develop a monopolitic-competition model of the materials sourcing decisions of heterogeneous...

It is widely feared that outward FDI gradually hollows out domestic manufacturing and displaces local workers. We address this concern by drawing on exceptionally informative firm-specific data on Taiwanese multinationals in manufacturing. In particular, we assess whether repercussions at home...

How do firms of different sizes react to trade liberalization? Leading theories suggest that, amongst continuing exporters, lower trade costs should boost exports of smaller firms by the same or a greater rate than those of larger firms. However, studying the entry into force of the ambitious...

This paper investigates the elusive role of productivity heterogeneity in new trade models in the trade and environment nexus. We contrast the Eaton-Kortum and the Melitz models with firm heterogeneity to the Armington and Krugman models without heterogeneity. We show that if firms have a...

We merge German balance-of-payments and foreign-affiliate-trade statistics to obtain data about trade in commercial services at the firm level. We use these data to study export market participation and the choice of export mode: cross-border versus foreign affiliate sales. We find that for...

I present a model of international trade and foreign direct investment (FDI), where FDI is comprised of greenfield FDI and mergers and acquisitions (M&A). Working in a monopolistically competitive environment, merging firms do not reduce competition. Mergers are motivated by efficiency gains and...

This paper examines how trade liberalization affects the innovation incentives of firms, and what this implies for industry productivity and social welfare. For this purpose we develop a reciprocal dumping model of international trade with heterogeneous firms and endogenous R&D. We identify two...