Essays on import sourcing, market-specific complementarity, and patent trade

Abstract

"Global sourcing has become a pivotal aspect of a firm's performance and contributes significantly to the world economy. Nowadays, the sourcing of imported inputs represents a substantial portion of international trade. Equally, the acquisition of foreign intangible assets, such as patents, is gaining prominence. This dissertation endeavors to investigate three unique dimensions of firm global sourcing behavior, leveraging highly dis-aggregated micro-level data from China: i) the dynamic adjustment of firms' global supplier networks, ii) the interplay between a firm's import sourcing origins and its export destinations, and iii) the firms' global sourcing of patents. In the first essay (with Yao Amber Li and Stephen Yeaple), we analyze the evolution of Chinese firms' sourcing adjustment in response to anti-dumping (AD) investigations as unanticipated shocks to foreign supplier base and document three stylized facts. We next build a simple model of sourcing search capacity to explain the observed supplier network adjustment among Chinese firms. To test the model predictions, we examine the impact of China's AD investigations towards other countries' exported goods on Chinese firms' import supplier network decisions (entry and exit of import origin markets, other than the targeted sourcing origins) for both targeted and non-targeted imports. We find that once subject to AD shock, firms are more likely to explore new origins and also more likely to exit existing origins for targeted imports, while they become more sluggish about entry and exit decision for non-targeted imports. Firms show more churning in import sourcing network adjustment in terms of entry and exit for targeted imports, but the opposite pattern obtains for non-targeted imports. Moreover, the foreign supplier network response to AD shocks presents significant heterogeneity across firms. Combining the customs data with firm-level production survey, we find that small, less productive firms or firms with smaller supplier base more actively adjust import sourcing supplier network on both targeted and non-targeted imports when facing AD shock, while large, more productive firms or firms with greater supplier base show more modest churning in their sourcing supplier network adjustment. The second essay (with Yao Amber Li, Sichuang Xu and Stephen Yeaple) examines whether and how a firm's export entry into a foreign market affects its import entry from the same place and its opposite case. We posit that a portion of the fixed costs of entering a specific export market can be used toward costs of acquiring imports from that same market, and vice versa, thus generating complementarity between a firm's export decision and its import decision within the same country. Using dis-aggregated transactions data for Chinese firms from 2000 to 2015, we document firm-level trading patterns that suggest such market-specific bilateral economies of scope. Using a structural model, we estimate that the simultaneous export and import in a given country reduces export and import fixed costs by over 41 and 37 percent, respectively. In the third essay, I investigate the impact of global patent sourcing on firm export performance. Using a novel database of firm-level patent transactions, I document several stylized facts regarding the connection between global patent purchase and export performance of Chinese firms. First, China's patent purchase is mainly targeted to the first patent filing in the corresponding patent family, conducted by a small number of Chinese firms, and concentrated in a few origins. Second, firms that select into patent purchase are larger in terms of export value and number of export destinations. Last but not least, the firm's patent purchase from a market is positively correlated with its future export and patent applications across the globe, mainly in the places where purchased patents have related family members. Then I develop a multi-market trade model allowing heterogeneous firms to purchase patents. Patent purchase from any origin could alter the firm's demand across global markets. Through the lens of my model, I structurally estimate the benefits and costs of patent purchase, and provide a quantitative assessment of patent purchase on bilateral trade flows."

Date of Award	2024
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology
Supervisor	Yao LI (Supervisor)