Abstract
We use firm-level data from Hungary to estimate knowledge spillovers in importing through fine spatial and managerial networks. By identifying from variation in peers' import experience across source countries, by comparing the spillover from neighboring buildings with a cross-street placebo, and by exploiting plausibly exogenous firm moves, we obtain credible estimates and establish three results. (1) There are significant knowledge spillovers in both spatial and managerial networks. Having a peer which has imported from a particular country more than doubles the probability of starting to import from that country, but the effect quickly decays with distance. (2) Spillovers are heterogeneous: they are stronger when firms or peers are larger or more productive, and exhibit complementarities in firm and peer productivity. (3) The model-implied social multiplier is highly skewed, implying that targeting an import-encouragement policy to firms with many and productive neighbors can make it 26% more effective. These results highlight the benefit of firm clusters in facilitating the diffusion of business practices.
Highlights
Imports have large positive effects on firm productivity (Amiti and Konings, 2007; Halpern et al, 2015), yet there is much heterogeneity in similar firms' importing behavior
We show that firms located in such an address start to import from the country known by the mover with a higher probability than from other countries, relative to firms in addresses where the mover had no such experience
Firm sample We focus on imports from four countries that are comparable in terms of their exports to Hungarian firms: the Czech Republic, Slovakia, Romania and Russia
Summary
Imports have large positive effects on firm productivity (Amiti and Konings, 2007; Halpern et al, 2015), yet there is much heterogeneity in similar firms' importing behavior. One explanation for this heterogeneity is the presence of informal trade barriers, when specific knowledge or a trusted partner is needed for a productive import relationship. In this paper we use firm-level data from Hungary to document and analyze knowledge diffusion in importing. Knowledge flows exhibit complementarities in firm and peer productivity, showing that positive sorting can increase the overall adoption of importing. We document that the model-implied social multiplier of importing is highly skewed in the number and type of peers, implying that import subsidies targeted at firms in buildings with many productive neighbors are much more effective
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