A large and growing literature on international trade focuses on the effect from outward foreign direct investment on trade dynamics in exports. However, this is an issue that has received limited attention in relation to the seafood trade despite the large quantities of seafood being traded. Using Norwegian firm-level customs data this paper investigates the effects of outward FDI on the export of fresh farmed salmon.
There are several explanations to why exporters of fresh salmon may choose to engage in outward FDI. First, outward FDI may be beneficial to firms that seek to transfer more labor-intensive processing of the raw product abroad to lower costs. Second, outward FDI makes it possible for exporters to penetrate deeper into new markets to better access important market information. Third, some firms may use horizontal outward FDI to expand their distribution network.
Our results suggest significant effects from outward FDI on export value, as well as on relevant trade margins, in Norwegian export of fresh whole salmon. The results indicate a positive association between outward FDI and trade value in general, as well as on prices to a given destination market for the largest exporters. The degree of export diversification, i.e. export of new products to new markets, has heterogeneous effects on different trade margins. We also control for traditional gravity variables and document that exporters charge higher prices to the most distant markets after controlling for outward FDI and export sophistication. Our results add to a growing literature exploring the micro fundaments of the aquaculture supply chain.