Exporting firms and retail internationalization: Evidence from France

• Author: Karine Latouche,Angela Cheptea,Charlotte Emlinger
• Published date: 01 June 2019
• DOI: http://doi.org/10.1111/jems.12294
• Date: 01 June 2019

Received: 14 April 2017

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Revised: 17 July 2018

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Accepted: 4 September 2018

DOI: 10.1111/jems.12294

ORIGINAL ARTICLE

Exporting firms and retail internationalization: Evidence

from France

Angela Cheptea

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Charlotte Emlinger

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Karine Latouche

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1

INRA, UMR 1302 SMART‐LERECO,

Rennes, France

2

CEPII, Paris, France

3

INRA, UMR 1302 SMART‐LERECO,

Nantes, France

Correspondence

Angela Cheptea, INRA, UMR 1302

SMART‐LERECO, 4 allée Adolphe

Bobierre, CS 61103, 35011 Rennes Cedex,

France.

Email: angela.cheptea@inra.fr

Funding information

European Commission FP7 Specific

programme “People”: Marie Curie

Actions, Grant/Award Number: 331958

MULTIRETAIL; European Commission

FP7 Specific Programme “Cooperation”:

Socio-economic Sciences and Humanities,

Grant/Award Number: 290693

FOODSECURE

Abstract

This paper questions the impact of the globalization of the retail sector on the

export activity of origin country agri‐food firms. We use an original firm‐level

database of French agri‐food exports that identifies the domestic suppliers of

French retailers through certification with the private International Featured

Standard (IFS). The results show that IFS certified French firms are more likely

to export and export larger volumes than noncertified firms to markets where

French retailers have established outlets. We also show that when French

retailers stop their activities in a market, certified firms reduce their exports to

this market in the following years. The results are robust to the use of different

sets of firm‐year‐and country‐year‐specific controls and fixed effects, and are

not affected by possible selection and endogeneity biases. The difference in the

behavior of certified and noncertified exporting firms on markets where French

retailers operate confirms the network effect that benefits retailers’suppliers,

which is lost when French retailers exit from the destination country.

KEYWORDS

firm‐level exports, multinational retailers, private standards

JEL CLASSIFICATION

F12, F14, F23

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INTRODUCTION

In 2012, 36% and 54% of sales by the world’s leading retailers Walmart and Carrefour, respectively, were made outside

their domestic market (Planet Retail database). The large‐size and extended transnational networks of outlets and

business connections make these multinational retailers major regional and global players. The increasing globalization

of the retail sector is likely to shape not only retailers’domestic and local economies, as suggested by the traditional

literature on foreign direct investment, but also the foreign trade of the origin and host countries. In particular, the

effect on trade is expected to be significant for food products, with 33% of the household food expenditure made in

supermarkets.

In this paper, we explore the impact of the overseas expansion of retailers on the export activity of agri‐food firms

from their country of origin. More precisely, we use detailed French firm‐level data to investigate whether the impact of

French retailers’sales in foreign markets on exports differs for firms that supply their outlets in the domestic market

than for other firms.

As information concerning retailers’commercial partners is confidential, we use data on certification with the

private International Featured Standard (IFS) to identify firms that supply the domestic outlets of French retailers. The

J Econ Manage Strat. 2019;28:561–582. wileyonlinelibrary.com/journal/jems © 2018 Wiley Periodicals, Inc.

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IFS is a quality and food safety standard required by all French retail companies from suppliers of products sold under

their brand. IFS certification is costly and needs to be renewed annually. Consequently, we can safely conclude that

each certified firm supplies at least one retailer on the domestic market.

This paper contributes to the literature on the role of multinational retailers in international trade. Our analysis

relates most to the work of Cheptea, Emlinger, and Latouche (2015), who used aggregated level data and found a strong

positive effect of the overseas sales of retailers from a given country on its exports to these markets. Our paper tackles

this topic in‐depth and questions whether this impact is heterogeneous among exporting firms by distinguishing

between retailers’suppliers at home and other firms. We limit our analysis to France, which is particularly appropriate

to address this question as it has some of the world’s largest retailers with wide transnational networks of outlets

(Auchan, Carrefour, etc.). Our work also connects to other papers that deal with the impact of the internationalization

of retail companies on trade, but which focus mainly on the effect on host countries. Head, Jing, and Swenson (2014)

analyzed the impact of multinational retailers established in China on exports by Chinese cities. Nordås, Grosso, and

Pinali (2008) present a case study to analyze the impact of the arrival of multinational retailers on the host country’s

export patterns.

More broadly, our article is also related to the literature on food global value chains. Gereffi and Lee (2012) and Lee,

Gereffi, and Beauvais (2012) showed that chains evolve from “producer‐driven chains”to “buyer‐driven chains,”in

which retailers of the final product exert power. Giovannetti and Marvasi (2016) exploited a survey of 25,090 agri‐food

Italians firms in 2011 and found that firms able to sell products through large supermarkets contribute to

internationalization.

The contribution of this study is threefold. First, we used an original data set on French agri‐food firms certified with

the IFS, which enabled us to identify which French agri‐food exporters supply French retail outlets in France. Second,

we show that the main benefits of the globalization of the retail sector are appropriated by the retailers’domestic

suppliers. Indeed, the results show that IFS certified French firms are more likely to export, and export larger amounts,

than noncertified firms to markets where French retailers have established outlets. The gap between the two types of

firms is statistically significant and robust to the use of different sets of firm‐year‐and country‐year‐specific controls and

fixed effects. The results did not change when we controlled for the auto‐selection of firms exporting to each market,

and the endogeneity of retailers’sales and firms’certification and export decisions. This suggests that the buyer–

supplier relationship continues when a retail company internationalizes. This finding is rather counterintuitive, as

foreign retailers mainly propose locally sourced products in their outlets. For example, according to Moreau (2008) and

Yoder, Visich, and Rustambekov (2016), 90–95% of the products sold in Chinese Carrefour and Walmart outlets

originate from China. Third, the analysis of the exit of French retailers from some markets allows us to go further and

confirms that suppliers of retail companies in the domestic market benefit from a network effect to export to

destinations where the retail company invests.

The rest of the article is structured as follows. In the following section, we discuss IFS certification and present

stylized facts about French certified and exporting agri‐food firms. In Section 3, we explain our empirical strategy, the

data we used, and present our main results. In Sections 3.3 and 3.4, we estimate the impact of the overseas expansion of

French retailers on the exports of certified and noncertified firms at the extensive and intensive margin. In Section 3.5,

we analyze how the exit of French retailers from some markets affects the export patterns of the two types of firms. In

Section 4, we test the robustness of our results by controlling for potential selection and endogeneity biases. In

Section 5, we present our conclusions.

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STYLIZED FACTS

2.1

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IFS certification to identify retailers’suppliers

Here, our objective is to see whether retailers’suppliers perform better on export markets where French retail

companies have established outlets. Although information on retailers’suppliers is highly confidential, data on the

certification of agri‐food firms with the private standards imposed by retailers enabled us to get around this difficulty.

French firms willing to sell their products in retailers’outlets have two options: Sell them under their own brand, or sell

products under a retailer’s brand or private label. Most firms that sell under their own brands, also sell similar products

under retailers’brands. This can be explained, for example, by firms’attempts to optimize their production capacities,

which often exceed their sales. To sell their products under the retailer’s label, firms need to comply with private

standards imposed by the latter, through certification obtained from an independent private organization.

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