Working Paper: CEPR ID: DP12639
Authors: Gabor Bekes; Balazs Murakozy
Abstract: How do firms enter international markets? To answer this question, this paper uses a unique multi-country firm-level dataset which, besides direct exporting and FDI, provides explicit information on a number of internationalization modes: indirect exporting, outsourced manufacturing and service FDI. We present a theoretical framework in which modes requiring higher and higher commitment have progressively higher fixed and lower marginal costs. By estimating multinomial and ordered logit models, we present evidence in line with such a sorting framework with respect to TFP and innovativeness. We identify three 'clusters' of modes: indirect exporters are similar to non-exporters, direct exporters and outsourced manufacturers constitute a second cluster while service and manufacturing FDI are the most demanding internationalization modes.
Keywords: firm heterogeneity; sorting; export; FDI; outsourcing; internationalization mode; ordered logit
JEL Codes: F14; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| total factor productivity (TFP) (D24) | internationalization mode (F30) |
| innovativenss (O31) | internationalization mode (F30) |