Import Competition and Firms' Internal Networks

62 Pages Posted: 14 Aug 2021 Last revised: 10 Dec 2021

See all articles by Jay Hyun

Jay Hyun

HEC Montréal

Ziho Park

University of Chicago, Department of Economics, Students; National Taiwan University

Vladimir Smirnyagin

Yale University

Date Written: December 1, 2021


Using administrative data on U.S. multisector firms, we document a cross-sectoral propagation of the import competition from China (``China shock'') through firms' internal networks: Employment of an establishment in a given industry is negatively affected by China shock that hits establishments in other industries within the same firm. This indirect propagation channel impacts both manufacturing and non-manufacturing establishments, and it operates primarily through the establishment exit. We explore a range of explanations for our findings, highlighting the role of within-firm trade across sectors, scope of production, and establishment size. At the sectoral aggregate level, China shock that propagates through firms' internal networks has a sizable impact on industry-level employment dynamics.

Keywords: China shock, import competition, multisector firms, network propagation, trade.

JEL Classification: D22, F14, F40

Suggested Citation

Hyun, Jay and Park, Ziho and Park, Ziho and Smirnyagin, Vladimir, Import Competition and Firms' Internal Networks (December 1, 2021). Available at SSRN: or

Jay Hyun (Contact Author)

HEC Montréal ( email )

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Ziho Park

National Taiwan University ( email )

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Taipei 106, 106
+82 01095092521 (Phone)

University of Chicago, Department of Economics, Students ( email )

Chicago, IL
United States

Vladimir Smirnyagin

Yale University ( email )

New Haven, CT
United States

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