Marcus Biermann

We show that internal capital markets of multinationals have large real effects and transmit shocks across countries. Our approach combines detailed micro data on internal capital markets with a quasi-experimental research design. Following an exogenous lending cut by a large German bank in 2008/09, parents of German multinationals became financially constrained. We find that affiliates of affected parents increased net lending to their parent after the lending cut. Affiliates were unable to raise external funding and instead had to reduce real activities to finance internal lending. As a result, affiliate sales fell sharply and took three years to fully recover. Effects were largest for affiliates that lent more to the parent and had weak access to external finance. Though the bank lending cut only directly hit firms located in Germany, the impact in other countries was large, due to transmission through multinationals (over 0.3 percent of aggregate sales in Austria, Czech Republic, and Poland). We argue that internal capital flows can affect the distribution of firm growth in most countries, since internal capital markets are large relative to aggregate capital flows and output.

What effect did trade have on the size distribution of firms during the first wave of globalization? Three historical datasets from the German Empire between 1875 and 1907 were collected and harmonized to answer this question. This paper combines industry census and bilateral railway trade data from the same industry and region along with industry-level tariff data. The evidence shows that increases in aggregate trade caused the share of firms to shift from smaller to larger firms. Exogenous decreases in tariffs caused an increase in the share of the largest firms. The regional distributive effects of trade on inequality between firms that are discussed in the contemporaneous literature were already present during the first wave globalization.

This paper investigates how management practices as intangible transfers are associated with the performance of multinational business groups. Differences in the management level across source countries are predictive for multinationals’ entry patterns for a given destination country. This study uses acquisitions as a means to transplant management practices from parents to affiliates abroad. It finds that better-managed parents decrease affiliates’ employment and increase affiliates’ productivity post-acquisition. Better-managed parents are also more likely to install or retain a manager from the home country post-acquisition.

Financing Service Trade (with Peter Eppinger and Karol Paludkiewicz)