Global integration in times of crisis: An event study of the impact the global financial crisis has on turkish subsidiaries' exporting strategies

Past research suggests that a financial crisis event has a dual and ambiguous effect on the exporting strategy of subsidiaries of multinational firms in a value chain and offshoring perspective. From a total volume perspective exports are expected to contract due to a decline in demand (demand shock) from other subsidiaries downstream in the value chain. While in a comparative perspective multinational subsidiaries are found to perform relatively better than local firms that are integrated differently (arms' length) in global production networks (e.g. offshoring outsourcing). This paper tries to reconcile these findings by testing a number of hypothesis about global integration strategies in the context of the global financial crisis and how it affected exporting among multinational subsidiaries operating out of Turkey. Controlling for the impact that depreciations and exchange rate volatility has on firm-level exports the study shows that the particular global event studied only had a positive effect (if any) on individual firms' exports. Since multinational subsidiaries are insulated from these effects as documented in this study they are able to expand rather than contract their global integration strategies throughout the course of the global financial crisis.