  The relationship between international trade and foreign direct investment
(FDI) is one of the main features of globalization. In this paper we
investigate the effects of FDI on trade from a network perspective, since FDI
takes not only direct but also indirect channels from origin to destination
countries because of firms' incentive to reduce tax burden, to minimize
coordination costs, and to break barriers to market entry. We use a unique data
set of international corporate control as a measure of stock FDI to construct a
corporate control network (CCN) where the nodes are the countries and the edges
are the corporate control relationships. Based on the CCN, the network
measures, i.e., the shortest path length and the communicability, are computed
to capture the indirect channel of FDI. Empirically we find that corporate
control has a positive effect on trade both directly and indirectly. The result
is robust with different specifications and estimation strategies. Hence, our
paper provides strong empirical evidence of the indirect effects of FDI on
trade. Moreover, we identify a number of interplaying factors such as regional
trade agreements and the region of Asia. We also find that the indirect effects
are more pronounced for manufacturing sectors than for primary sectors such as
oil extraction and agriculture.
