Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
Events
DE
EN
Books
Journals
Topic Page
Marketing
Start single access now
Access for companies
EXTENDED SEARCH
Log in
Top
Published in:
Introduction and Overview Read chapter Read first chapter

2014 | OriginalPaper | Chapter

The Role of Non-productivity Factors in the Internationalization of Firms

Author : Yasuyuki Todo

Published in: Internationalization of Japanese Firms

Publisher: Springer Japan

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

Using firm-level data for Japan, this chapter examines the determinants of export and foreign direct investment (FDI) decisions. We contribute to the literature by employing a mixed logit model to incorporate any unobserved firm heterogeneity and by paying special attention to the quantitative significance of the determinants. We find that although the effect of productivity on export and FDI decisions is positive and statistically significant, this effect is economically negligible. The quantitatively dominant determinants of the export and FDI decision are instead the prior status of firms in terms of internationalization and unobserved firm characteristics. This finding suggests that foreign market entry costs, which vary substantially in size across firms, play an important role in the export and FDI decision. Using a unique dataset for small and medium enterprises, we further show that such non-productivity factors of firm internationalization that are unobserved in standard firm-level data include the risk and time preferences and international experience of decision makers.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

inform now
previous chapter Heterogeneity and the Structure of Export and FDI: A Cross-Industry Analysis of Japanese Manufacturing
next chapter Entry into Foreign Markets Through Foreign Direct Investment
Footnotes
1
Existing works on this issue include the works of Clerides et al. (1998) for Columbia, Mexico, and Morocco; Bernard and Jensen (1999, 2004) and Bernard et al. (2003) for the US; Head and Ries (2003) and Tomiura (2007) for Japan; Barrios et al. (2003) for Spain; Greenaway and Kneller (2004) for the UK; Mayer and Ottaviano (2007) for various European Union (EU) countries; Damijan et al. (2007) for Slovenia; and Eaton et al. (2011) for France. Useful surveys of this literature can be found in the works of Bernard et al. (2007), Greenaway and Kneller (2007), and Wagner (2007, 2012).
 
2
Throughout this chapter, the internationalization of firms is defined as engaging in export, foreign direct investment, or international sourcing (offshoring).
 
3
The figure is taken from Wakasugi et al. (2008), who employ the same firm-level data for Japanese firms used in the current analysis.
 
4
As an experiment, we distinguished between firms engaging in FDI but not in exports and firms engaging in both FDI and exports. However, our central findings remained unchanged.
 
5
Using firm-level data from Mexico, Aitken et al. (1997) first investigated whether spillovers from other firms promote exports, finding evidence of spillovers from multinational enterprises but not from exporting firms. Using UK data, Greenaway et al. (2004) obtain similar results. Conversely, Bernard and Jensen (2004) use US data and Barrios et al. (2003) examine Spanish data, both finding positive spillover effects.
 
6
Manova (2008) employs cross-country data and finds that equity market liberalization increased exports more in credit-constrained sectors than in other sectors, concluding that credit constraints are an important determinant of international trade flows. Muûls (2008) re-examines a similar issue using firm-level data for Belgium and employing a bankruptcy risk measure provided by Coface, a credit insurance company, as a measure of the extent of credit constraints. Muûls (2008) concludes that credit constraints indeed affect the export decisions of Belgian firms.
 
7
This definition implies that when firms did not report their exports, we define these firms as firms that do not engage in exporting.
 
8
In the survey, ‘foreign subsidiaries’ are overseas firms in which the Japanese parent holds an equity stake of more than 50%, whereas ‘foreign affiliates’ are overseas firms in which the Japanese parent holds between 20 and 50% of equity. However, we do not distinguish between foreign subsidiaries and affiliates in this study.
 
9
When constructing the data set, we relied heavily on Stata programs provided by Matsuura (2004).
 
10
When we assume that the coefficients on the dummies for previous status, the values of γ in Eq. (2), are not stochastic but rather constant across firms, the predicted probabilities are closer to the actual probabilities. The respective predicted probability that the average domestic firm becomes an exporter or an FDI firm is 2.34 and 1.22%, as compared to the actual probabilities of 2.51 and 1.37%. However, as discussed in Sect. 2, assuming random coefficients on the dummies is necessary to correct for possible biases from the correlation between the error term and the dummies for prior status. Nevertheless, our main results do not change using the alternative specification.
 
11
We consider a 9-year period, as our data set covers the 1997–2005 period.
 
12
In the benchmark estimation in Table 3, we find that the effect of TFP on the FDI decision is insignificant. However, when we exclude the log of employment from the set of covariates, the effect of TFP becomes highly significant, as noted in Sect. 4.1.
 
Literature
Aitken, B. J., Hanson, G. H., & Harrison, A. (1997). Spillovers, foreign investment, and export behavior. Journal of International Economics, 43(2), 103–132.CrossRef
Barrios, S., Görg, H., & Strobl, E. (2003). Explaining firms’ export behaviour: R&D, spillovers and the destination market. Oxford Bulletin of Economics and Statistics, 65(4), 475–496.CrossRef
Bernard, A. B., Eaton, J., Jensen, J. B., & Kortum, S. (2003). Plants and productivity in international trade. American Economic Review, 93(4), 1268–1290.CrossRef
Bernard, A. B., & Jensen, J. B. (1999). Exceptional exporter performance: Cause, effect, or both? Journal of International Economics, 47(1), 1–25.CrossRef
Bernard, A. B., & Jensen, J. B. (2004). Why some firms export. Review of Economics and Statistics, 86(2), 561–569.CrossRef
Bernard, A. B., Jensen, J. B., Redding, S., & Schott, P. K. (2007). Firms in international trade. Journal of Economic Perspectives, 21(3), 105–130.CrossRef
Bernard, A. B., & Wagner, J. (2001). Export entry and exit by German firms. Weltwirtschaftliches Archiv, 137(1), 105–123.CrossRef
Caballero, R. J., Hoshi, T., & Kashyap, A. K. (2008). Zombie lending and depressed restructuring in Japan. American Economic Review, 98(5), 1943–1977.CrossRef
Clerides, S. K., Lach, S., & Tybout, J. R. (1998). Is learning by exporting important? Micro-dynamic evidence from Colombia, Mexico, and Morocco. Quarterly Journal of Economics, 113(3), 903–947.CrossRef
Damijan, J. P., Polanec, S., & Prasnikar, J. (2007). Outward FDI and productivity: Micro-evidence from Slovenia. The World Economy, 30(1), 135–155.CrossRef
Eaton, J., Kortum, S., & Kramarz, F. (2011). An anatomy of international trade: Evidence from French firms. Econometrica, 79(5), 1453–1498.CrossRef
Greenaway, D., & Kneller, R. (2004). Exporting and productivity in the United Kingdom. Oxford Review of Economic Policy, 20(3), 358–371.CrossRef
Greenaway, D., & Kneller, R. (2007). Firm heterogeneity, exporting and foreign direct investment. Economic Journal, 117(517), F134–F161.CrossRef
Greenaway, D., Sousa, N., & Wakelin, K. (2004). Do domestic firms learn to export from multinationals? European Journal of Political Economy, 20(4), 1027–1043.CrossRef
Head, K., & Ries, J. (2003). Heterogeneity and the FDI versus export decision of Japanese manufacturers. Journal of the Japanese and International Economies, 17(4), 448–467.CrossRef
Helpman, E., Melitz, M. J., & Yeaple, S. R. (2004). Export versus FDI with heterogeneous firms. American Economic Review, 94(1), 300–316.CrossRef
Johannesson, M., & Lundin, D. (2001). The impact of physician preferences and patient habits on the diffusion of new drugs. SSE/EFI Working Paper Series in Economics and Finance, No. 460.
Kimura, F., & Kiyota, K. (2006). Exports, FDI, and productivity: Dynamic evidence from Japanese firms. Review of World Economics, 142(4), 695–719.CrossRef
Kiyota, K., & Urata, S. (2008). The role of multinational firms in international trade: The case of Japan. Japan and the World Economy, 20(3), 338–352.CrossRef
Manova, K. (2008). Credit constraints, equity market liberalizations and international trade. Journal of International Economics, 76(1), 33–47.CrossRef
Matsuura, T. (2004). Estimation of economic activity of Japanese multinationals. Keizai Toukei Kenkyu, 32(4), 1–16.
Mayer, T., & Ottaviano, G. I. P. (2007). The happy few: The internationalisation of European firms. Brussels: Bruegel.
Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725.CrossRef
Nishimura, K. G., Nakajima, T., & Kiyota, K. (2005). Does the natural selection mechanism still work in severe recessions?: Examination of the Japanese economy in the 1990s. Journal of Economic Behavior and Organization, 58(1), 53–78.CrossRef
Olley, S. G., & Pakes, A. (1996). The dynamics of productivity in the telecommunications equipment industry. Econometrica, 64(6), 1263–1297.CrossRef
Peek, J., & Rosengren, E. S. (2005). Unnatural selection: Perverse incentives and the misallocation of credit in Japan. American Economic Review, 95(4), 1144–1166.CrossRef
Todo, Y. (2011). Quantitative evaluation of determinants of export and FDI: Firm-level evidence from Japan. The World Economy, 34(3), 355–381.CrossRef
Tomiura, E. (2007). Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm level. Journal of International Economics, 72(1), 113–127.CrossRef
Wagner, J. (2007). Exports and productivity: A survey of the evidence from firm-level data. The World Economy, 30(1), 60–82.CrossRef
Wagner, J. (2012). International trade and firm performance: A survey of empirical studies since 2006. Review of World Economics, 148(2), 235–267.CrossRef
Eaton, J., Eslave, M., Kugler, M., & Tybout, J. R. (2007). Export dynamics in Columbia: Firm-level evidence. NBER Working Paper, No. W13531.
Ito, Y. (2007). Choice for FDI and post-FDI productivity. RIETI Discussion Paper, No. 07-E-049. Research Institute of Economy, Trade and Industry.
Muûls, M. (2008). Exporters and credit constraints: A firm-level approach. National Bank of Belgium Working Paper, No. 139.
Todo, Y., & Sato, H. (2011). Effects of CEOs’ characteristics on internationalization of small and medium enterprises in Japan. RIETI Discussion Paper, No. 11-E-026.
Wakasugi, R., Todo, Y., Sato, H., Nishioka, S., Matsuura, T., Ito, B., et al. (2008). The internationalization of Japanese firms: New findings based on firm-level data. RIETI Discussion Paper, No. 08-E-036. Research Institute of Economy, Trade and Industry.
Metadata
Title
The Role of Non-productivity Factors in the Internationalization of Firms
Author
Yasuyuki Todo
Copyright Year
2014
Publisher
Springer Japan
Book
Internationalization of Japanese Firms

Print ISBN: 978-4-431-54531-6

Electronic ISBN: 978-4-431-54532-3

Copyright Year: 2014

DOI
https://doi.org/10.1007/978-4-431-54532-3_4

Premium Partner

    Image Credits