Firms play a critical role in the global economy. In this chapter, the authors survey the behavior of firms in the international economy, both in theory and in the data. They first summarize the key empirical facts that motivate the study of firms in trade. Then they detail recent theoretical developments on the micro-foundations of firm behavior in an international context, focusing on how firms select into exporting and how firms respond to international shocks. Finally, they turn to a “real world,” empirically focused view of exporting, beginning with the growth dynamics of firms expanding to global markets, and then addressing the critical financing decisions firms make when engaging in international commerce. They conclude with directions for future research.
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