This paper explores the relationship between imports and firm productivity, focusing
on imported intermediates. Using firm-level data on over 20,000 manufacturing firms in Viet
Nam, we find evidence for competition-induced productivity gains from trade. We show that
gains in intermediate sectors spill-over to downstream sectors such that firms using more inputs
from import-intensive sectors experience higher productivity gains. The evidence indicates that
the main source of spill-over is better quality, domestically produced inputs. Ignoring the gains
from trade through this mechanism may significantly underestimate the impact of trade on
productivity.