Firm interconnectedness and resilience: evidence from the Italian manufacturing

Abstract

This article explores how firm interconnectedness determines firm-level resilience. We argue that firms that engage in outward foreign direct investment are more interconnected, and therefore better equipped to deal with structural and economic shocks, than firms that are not engaged in outward foreign investment. Interconnectedness is measured along two dimensions; cross-border firm linkages and embeddedness in interconnected regions. We use a sample of 13,000 Italian manufacturing firms during the period 2008–2011. We find a positive association between firm interconnectedness and resilience. Moreover, we find the firms that operate in more interconnected regions to be more resilient than firms that operate in relatively isolated regions. Our results offer new insights into the complex interaction between firm and regional interconnectedness.