Channels of influence
By: Lauren Cohen, Umit G. Gurun, and Christopher J. Malloy
Contributors: Gurun, Umit G.; Malloy, Christopher J.; Harvard Business School
Series: Working paper / Harvard Business School -- 13-013; Working paper (Harvard Business School) -- 13-013.
Publisher: Harvard Business School
Published: 2012
Place of publication: [Boston]
Language: eng
Number of pages: 27
Description: We demonstrate that simply by using the ethnic makeup surrounding a firm's location, we can predict, on average, which trade links are valuable for firms. Using customs and port authority data on the international shipments of all U.S. publicly-traded firms, we show that firms are significantly more likely to trade with countries that have a strong resident population near their firm headquarters. We use the formation of World War II Japanese Internment Camps to isolate exogenous shocks to local ethnic populations, and identify a causal link between local networks and firm trade links. Firms that exploit their local networks (strategic traders) see significant increases in future sales growth and profitability, and outperform other importers and exporters by 5%-7% per year in risk-adjusted stock returns. In sum, our results document a surprisingly large impact of immigrants' economic role as conduits of information for firms in their new countries.
Notes: "August 2012" -- Publisher's website.

Includes bibliographical references.