Surviving Globalisation

This paper investigates the effects of international trade on firms' exit decision in Sweden, where exit can be by closedown, switching industry or being acquired. We find that higher levels of international competition increases the probability of exit by merger and closedown compared to no change. If trade is intra-industry in character the effect of import penetration on the probability of exit mitigates. The probability of exit by switching industry is higher in industries characterised by comparative disadvantage. Finally, we find the origin of international competition is significant; the effects are strongest when trade is with OECD countries.