IDEAS home Printed from https://ideas.repec.org/a/eee/jjieco/v34y2014icp236-255.html
   My bibliography  Save this article

Effects of presidents’ characteristics on internationalization of small and medium firms in Japan

Author

Listed:
  • Todo, Yasuyuki
  • Sato, Hitoshi

Abstract

Recent heterogeneous-firm models of international trade suggest that productivity determines whether firms engage in export activity and foreign direct investment. In practice, however, many productive firms are not internationalized, whereas many unproductive firms are, which suggests that there are factors other than productivity that influence firms’ internationalization. This study uses a unique panel data set for Japanese small and medium enterprises (SMEs) to examine whether the personal characteristics of a firm’s president are factors in firm internationalization. We find that SMEs with a risk-tolerant, forward-looking president are more likely to be internationalized. These effects are large in magnitude, as is the productivity effect, which provides a partial explanation as to why many productive firms are not internationalized. In addition, we find that productivity has an insignificant effect on firms exiting export markets, whereas presidential myopia increases the probability of exit. The evidence further suggests that a firm’s initial export costs become sunk following its entry into export markets, which explains why many unproductive firms are internationalized.

Suggested Citation

  • Todo, Yasuyuki & Sato, Hitoshi, 2014. "Effects of presidents’ characteristics on internationalization of small and medium firms in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 236-255.
  • Handle: RePEc:eee:jjieco:v:34:y:2014:i:c:p:236-255
    DOI: 10.1016/j.jjie.2014.08.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0889158314000483
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jjie.2014.08.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    2. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    3. Salvador Barrios & Holger Görg & Eric Strobl, 2003. "Explaining Firms’ Export Behaviour: R&D, Spillovers and the Destination Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 475-496, September.
    4. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    5. Baldwin, Richard E. & Robert-Nicoud, Frederic, 2008. "Trade and growth with heterogeneous firms," Journal of International Economics, Elsevier, vol. 74(1), pages 21-34, January.
    6. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 903-947.
    7. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2011. "An Anatomy of International Trade: Evidence From French Firms," Econometrica, Econometric Society, vol. 79(5), pages 1453-1498, September.
    8. Joachim Wagner, 2016. "Exports and Productivity: A Survey of the Evidence from Firm Level Data," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 1, pages 3-41, World Scientific Publishing Co. Pte. Ltd..
    9. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
    10. Rafael Rob & Nikolaos Vettas, 2003. "Foreign Direct Investment and Exports with Growing Demand," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 629-648.
    11. Yasuyuki Todo, 2011. "Quantitative Evaluation of the Determinants of Export and FDI: Firm‐level Evidence from Japan," The World Economy, Wiley Blackwell, vol. 34(3), pages 355-381, March.
    12. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    13. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 43(3), pages 135-148, May.
    14. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    15. Tomomi Tanaka & Colin F. Camerer & Quang Nguyen, 2010. "Risk and Time Preferences: Linking Experimental and Household Survey Data from Vietnam," American Economic Review, American Economic Association, vol. 100(1), pages 557-571, March.
    16. Head, Keith & Ries, John, 2003. "Heterogeneity and the FDI versus export decision of Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 448-467, December.
    17. Fukunari Kimura & Kozo Kiyota, 2006. "Exports, FDI, and Productivity: Dynamic Evidence from Japanese Firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(4), pages 695-719, December.
    18. Tomiura, Eiichi, 2007. "Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm level," Journal of International Economics, Elsevier, vol. 72(1), pages 113-127, May.
    19. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
    20. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    21. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    22. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
    23. Quang Nguyen & Colin Camerer & Tomomi Tanaka, 2010. "Risk and Time Preferences Linking Experimental and Household Data from Vietnam," Post-Print halshs-00547090, HAL.
    24. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    25. David Greenaway & Richard Kneller, 2007. "Firm heterogeneity, exporting and foreign direct investment," Economic Journal, Royal Economic Society, vol. 117(517), pages 134-161, February.
    26. Jože P. Damijan & Sašo Polanec & Janez Prašnikar, 2007. "Outward FDI and Productivity: Micro‐evidence from Slovenia," The World Economy, Wiley Blackwell, vol. 30(1), pages 135-155, January.
    27. Andrew Bernard & Joachim Wagner, 2001. "Export entry and exit by German firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(1), pages 105-123, March.
    28. David Greenaway & Richard Kneller, 2004. "Exporting and Productivity in the United Kingdom," Oxford Review of Economic Policy, Oxford University Press, vol. 20(3), pages 358-371, Autumn.
    29. repec:hal:wpspec:info:hdl:2441/10147 is not listed on IDEAS
    30. repec:hal:spmain:info:hdl:2441/10147 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yasuyuki Todo, 2016. "The effects of privatization on exports and jobs," IZA World of Labor, Institute of Labor Economics (IZA), pages 309-309, November.
    2. OKUBO Toshihiro & Alexander F. WAGNER & YAMADA Kazuo, 2017. "Does Foreign Ownership Explain Company Export and Innovation Decisions? Evidence from Japan," Discussion papers 17099, Research Institute of Economy, Trade and Industry (RIETI).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. TODO Yasuyuki & SATO Hitoshi, 2011. "Effects of CEOs' Characteristics on Internationalization of Small and Medium Enterprises in Japan," Discussion papers 11026, Research Institute of Economy, Trade and Industry (RIETI).
    2. Federici, Daniela & Parisi, Valentino & Ferrante, Francesco, 2020. "Heterogeneous firms, corporate taxes and export behavior: A firm-level investigation for Italy," Economic Modelling, Elsevier, vol. 88(C), pages 98-112.
    3. Aida Caldera, 2010. "Innovation and exporting: evidence from Spanish manufacturing firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(4), pages 657-689, December.
    4. Matthew A. Cole & Robert J. R. Elliott & Supreeya Virakul, 2010. "Firm Heterogeneity, Origin of Ownership and Export Participation," The World Economy, Wiley Blackwell, vol. 33(2), pages 264-291, February.
    5. Gianmarco Ottaviano & Christian Volpe Martincus, 2011. "SMEs in Argentina: who are the exporters?," Small Business Economics, Springer, vol. 37(3), pages 341-361, October.
    6. Gopinath, Munisamy & Sheldon, Ian M. & Echeverria, Rodrigo, 2007. "Firm Heterogeneity and International Trade: Implications for Agricultural and Food Industries," Trade Issues Papers 9349, International Agricultural Trade Research Consortium.
    7. Joachim Wagner, 2016. "International Trade and Firm Performance: A Survey of Empirical Studies since 2006," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 2, pages 43-87, World Scientific Publishing Co. Pte. Ltd..
    8. Mr. Ichiro Tokutsu & Mr. Kazuo Ogawa & Mika Saito, 2012. "Japan out of the Lost Decade: Divine Wind or Firms’ Effort?," IMF Working Papers 2012/171, International Monetary Fund.
    9. Codruța Dura & Oana Dobre-Baron, 2011. "Analysis of Foreign Direct Investments Engaged by Japanese Multinational Companies," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 11(2), pages 81-92.
    10. Naudé, Wim & Gries, Thomas & Bilkic, Natasa, 2015. "Playing the lottery or dressing up? A model of firm-level heterogeneity and the decision to export," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 1-17.
    11. Koenig, Pamina & Mayneris, Florian & Poncet, Sandra, 2010. "Local export spillovers in France," European Economic Review, Elsevier, vol. 54(4), pages 622-641, May.
    12. Yasuyuki Todo, 2011. "Quantitative Evaluation of the Determinants of Export and FDI: Firm‐level Evidence from Japan," The World Economy, Wiley Blackwell, vol. 34(3), pages 355-381, March.
    13. Kiyota, Kozo & Urata, Shujiro, 2008. "The role of multinational firms in international trade: The case of Japan," Japan and the World Economy, Elsevier, vol. 20(3), pages 338-352, August.
    14. Baldwin, Richard E. & Robert-Nicoud, Frederic, 2008. "Trade and growth with heterogeneous firms," Journal of International Economics, Elsevier, vol. 74(1), pages 21-34, January.
    15. Rigby, David L. & Kemeny, Thomas & Cooke, Abigail, 2017. "Plant exit and U.S. imports from low-wage countries," International Economics, Elsevier, vol. 149(C), pages 27-40.
    16. Neil Foster-McGregor, 2012. "Innovation and Technology Transfer across Countries," wiiw Research Reports 380, The Vienna Institute for International Economic Studies, wiiw.
    17. Rudy Douven & Remco Mocking & Ilaria Mosca, 2012. "The Effect of Physician Fees and Density Differences on Regional Variation in Hospital Treatments," CPB Discussion Paper 208.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    18. Federico J. Diez & Jesse Mora & Alan C. Spearot, 2016. "Firms in international trade," Working Papers 16-25, Federal Reserve Bank of Boston.
    19. Henk L. M. Kox, 2013. "Export Decisions of Services Firms Between Agglomeration Effects and Market-Entry Costs," Advances in Spatial Science, in: Juan R. Cuadrado-Roura (ed.), Service Industries and Regions, edition 127, chapter 0, pages 177-201, Springer.
    20. Roberto Alvarez & Ricardo A. López, 2008. "Entry and Exit in International Markets: Evidence from Chilean Data," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 692-708, September.

    More about this item

    Keywords

    Trade; Foreign direct investment; Small and medium enterprises; Risk and time preference; Japan;
    All these keywords.

    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jjieco:v:34:y:2014:i:c:p:236-255. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622903 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.