Intra-firm Trade and Resilience to Aggregate Trade Shocks: Evidence from Korean Manufacturing Firms

Using firm-level data on Korean manufacturing firms from 2006 to 2015, we examine how reliance on intra-firm trade is associated with trade adjustment during two contrasting episodes: the abrupt trade collapse of 2008–2009, followed by a rapid recovery, and the gradual, prolonged trade slowdown of 2012–2015. Our fixed-effects panel analysis yields two main findings. First, at the intensive margin, greater pre-shock intra-firm trade intensity is associated with lower export growth during the global financial crisis but higher export and import growth during the prolonged slowdown, suggesting greater resilience under persistent trade weakness. Second, at the extensive margin, firms with greater pre-shock intra-firm import intensity are relatively less likely to exit import markets during both episodes, whereas no comparable evidence is found for export exit. Thus, while resilience in trade growth varies across shocks, resilience in maintaining foreign sourcing is consistently evident across both episodes.