How the breadth and depth of import relationships affect the performance of Canadian manufacturers

Abstract

AbstractThis paper examines the relationship between a manufacturing firm's import behaviour and its performance. The focus is on two aspects of imports, input variety and the dynamics of import relationships. Using identification conditions borrowed from the production function estimation literature, we show that firms importing more products from a larger set of suppliers tend to be larger, more productive and more successful in export markets. Not only does the number of supply relationships matter but also the duration. Firms maintaining a higher share of continuous supply relationships also benefit from size and productivity effects. These results suggest that the breadth and depth of the import network are relevant factors for the performance of Canadian manufacturers, underscoring the importance of pursuing trade liberalizations with new partners and trade facilitation with established sources of suppliers.