The Culture-Promotion Effect of Multinationals on Trade: the IKEA case

This paper identifies an externality of multinationals on trade, channelled through their power of promoting cultures across countries. In particular, it shows how multinationals, by selling products embodying cultural information related to their country of origin, promote exports of the latter. We argue that IKEA offers an ideal case to identify a multinational’s culture-promotion effect on trade. We build a dataset on IKEA’s presence in foreign markets between 1995 and 2015 and merge it with disaggregated product level trade between pairs of countries. We find solid evidence of an externality linked to IKEA: a setting of an IKEA new store in a destination increases trade flows by around 2% from Sweden for products that resemble to what the multinational offers (despite being completely unrelated to the multinational). This result is driven primarily by the products identified to encompass a high-cultural content. The robustness checks and tests seem to be very much consistent with the hypothesis of IKEA promoting the Swedish culture to the world.