The name is absent

behaviour. Next, we relate the trade intensity index constructed combining import and
export intensities⁷ to firm performance controlling for foreign ownership to find
evidence that firms involved in foreign networks both trough contacts with foreign
buyers and with foreign suppliers are advantaged with respect to other firms⁸.

These two variables have already been combined in the trade literature when studying,
on aggregated data, the relevance of the fragmentation of production processes across
borders (Yeats 2001) and of interconnectedness of production processes in vertical
trading chains across countries (Hummels, Ishii and Yi 2001). The first author finds that
the production-sharing component of all US manufacturing trade is 30 percent while for
Hummels, Ishii and Yi (2001) the growth in vertical specialization exports accounts for
25% or more of the growth in overall exports of OECD countries between 1970 and
1990, rising up to 50% for Mexico and Taiwan. These analyses are however limited to
the quantification of the phenomenon and the firm level implications of being involved
in such networks have not been explored jet.

3. Data and Descriptive Statistics

The data set used in this paper is based on a firm-level survey⁹ conducted by the
Development Research Group-Investment Climate Unit of the World Bank jointly with
the Confederation of Indian Industries (CII) and the Indian Council for Research on
International Foreign Relations. Two consecutive rounds of this Investment Climate
Survey have been conducted, in 2000 and 2002¹⁰. The resulting balanced panel dataset

⁷ Given that for firms there can be a coexistence of domestic and foreign activities, we focus on the share
of output exported, rather than following the traditional approach of using, as main variable of interest, a
dichotomous exporting status

⁸ It could be the case that firms more involved in foreign networks would be more productive because the
combination of import and export engagements is associated with higher knowledge flows and more
intense learning processes (MacGarvie, 2003) Or alternatively, the more productive firms, that self select
into the export market, also choose to import some of their inputs in order to maintain their
competitiveness.

⁹ For the sample design see Dollar, Iarossi and Mengistae (2002), Appendix A.

¹⁰ see appendix 2B from Chapter 2 and appendix 4B from Chapter 4 for the sampling frameworks of the
two surveys.

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