Learning to Import through Production Networks

TL;DR

This paper demonstrates that firms learn to import through their domestic network connections, with evidence showing network effects influence import behavior, and distant connections provide valuable information, especially for larger firms.

Contribution

It introduces an empirical strategy exploiting firm network data to identify how domestic networks influence import decisions, highlighting the importance of network structure.

Findings

A 10 percentage point increase in importing suppliers raises import probability by 10.7%.

Connections with distant firms are more informative for starting imports.

Larger firms are more responsive but less likely to share import information.

Abstract

Using administrative data on the universe of inter-firm transactions in Spain, we show that firms learn to import from their domestic suppliers and customers. Our identification strategy exploits the panel structure of the data, the firm-time variation across import origins, and the network structure. We find evidence of both upstream and downstream network effects, even after accounting for sectoral and spatial spillovers. We estimate that an increase of 10 percentage points in the share of suppliers (customers) that are importing from a given region increases the probability of starting importing from that region by 10.7\% (19.2\%). Connections with geographically distant domestic firms provide more useful information to start importing. Larger firms are more responsive to this information but less likely to disseminate it.