February 2017
Article
Journal of Finance

Resident Networks and Corporate Connections: Evidence from World War II Internment Camps

By: Lauren Cohen, Umit Gurun and Christopher J. Malloy

Format:Print

Abstract

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 large 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. We also show that firms are more likely to acquire target firms, and report increased segment sales, in countries to which they are connected. Firms that exploit their local networks also see significant increases in future sales growth and profitability. In sum, our results document a surprisingly large impact of immigrants’ role as economic conduits for firms in their new countries.

Keywords

Information Networks; Trade Links; Firm Behavior; Networks; Geographic Location; Ethnicity; Organizations; Trade

Citation

Cohen, Lauren, Umit Gurun, and Christopher J. Malloy. "Resident Networks and Corporate Connections: Evidence from World War II Internment Camps." Journal of Finance 72, no. 1 (February 2017): 207–248. (Winner of First Prize, the Inaugural Hakan Orbay Research Award, 2015.)