Multinational Retailers and Host Countries' Export Competitiveness

ABSTRACT The paper investigates how the overseas activity of multinational retailers (MRs) affects the global export patterns of host country firms. Recent empirical works testify that the entry of foreign retailers leads to a productivity upgrade in the domestic upstream sectors. Combined with the main result of the new international trade theory on firm heterogeneity, an increase in the export capacity of local firms should follow. The current paper establishes a connection between these empirically identified effects and the new new theory of international trade with heterogeneous firms and intermediaries. Two mechanisms are analysed. First, the higher productivity at the industry and firm level leads to an increase in the overall export capacity of local firms. Second, the expansion of transnational retail networks reinforces trade between host countries.