Economic missions and firm internationalization: evidence from the Netherlands

Trade and investment support institutions can help their domestic firms internationalize. In doing so, economic missions accompanied by a member of government are the strongest instrument at their disposal. We combine detailed information on the activities of the full population of Dutch firms over the period 2008–2017 to estimate the effect of firm participation in economic missions on the extensive margin of trade in both goods and services as well as FDI. Using a range of empirical methods, we first show that mission participation increases the chance of market entry via goods exports or imports as well as FDI by 5.4, 5.8 and 2.3% points, respectively, while trade in services is not affected. These results are robust to various pre-selections that control for differences in internationalization appetite. We then open the “black box” of trade and investment promotion by showing that firm size, additional missions, a thematic focus and the destinations’ business climate are important success factors. Further strengthened by the results of a qualitative survey, we interpret these findings as evidence that missions play a crucial role in reducing information asymmetries as well as in firms’ stepwise internationalization process.