How do rms' sales interact across markets? Are foreign and domestic sales complements or substitutes? Using a large French rm-level database that combine balance-sheet and product-destination-speci c export information over the period 1995-2001, we study the interconnections between exports and domestic sales. We identify exogenous shocks that a ect rm demand on foreign markets to instrument yearly variations in exports. Our results show that exogenous variations in foreign sales are positively associated with domestic sales, even after controlling for changes in domestic demand. A 10% exogenous increase in exports generates a 1.5 to 3% increase in domestic sales in the short-term. This result is robust to various esti-mation techniques, instruments, controls, and sub-samples. It is also supported by the natural experiment of the Asian crisis in the late 1990's. We discuss various channels that may explain this complementarity.
