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Effects of CEOs' Characteristics on Internationalization of Small and Medium Enterprises in Japan

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  • TODO Yasuyuki
  • SATO Hitoshi

Abstract

Recent heterogeneous-firm models of international trade suggest that productivity determines whether firms engage in export and foreign direct investment. However in practice, m Abstract any productive firms are not internationalized, whereas many unproductive firms are. This situation suggests that factors other than productivity influence internationalization. This study examines a set of potential factors -personal characteristics of the chief executive officer (CEO)- using a unique panel dataset for Japanese small and medium enterprises (SMEs). We find that SMEs are more likely to be internationalized when the CEO is more risk-tolerant, forward-looking, and internationally experienced. These factors show significant statistical relationships with SMEs' decisions to internationalize, perhaps suggesting why productive firms might not internationalize. In addition, we find that productivity has no significant relationship with the decision of exiting international markets probably because initial costs of internationalization become sunk, whereas SMEs with internationally experienced CEOs show strongly less likelihood of exit. These empirical results are consistent with theoretical predictions of our model that incorporates the uncertainty of foreign markets into the trade theory with firm heterogeneity.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11026.

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Length: 29 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:eti:dpaper:11026

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  1. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer, vol. 43(3), pages 135-148, May.
  2. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "Learning-by-Exporting" Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco," NBER Working Papers 5715, National Bureau of Economic Research, Inc.
  3. 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.
  4. 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, 01.
  5. Salvador Barrios & Holger Goerg & 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, 09.
  6. 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.
  7. 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 557-71, March.
  8. Fukunari Kimura & Kozo Kiyota, 2006. "Exports, FDI, and Productivity: Dynamic Evidence from Japanese Firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(4), pages 695-719, December.
  9. TODO Yasuyuki, 2009. "Quantitative Evaluation of Determinants of Export and FDI: Firm-level evidence from Japan," Discussion papers 09019, Research Institute of Economy, Trade and Industry (RIETI).
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Cited by:
  1. TODO Yasuyuki & INUI Tomohiko & YUAN Yuan, 2012. "Effects of Privatization on Exporting Decisions: Firm-level evidence from Chinese state-owned enterprises," Discussion papers 12015, Research Institute of Economy, Trade and Industry (RIETI).
  2. KWON Hyeog Ug, 2012. "Offshoring of Japanese Small and Medium Enterprises (Japanese)," Discussion Papers (Japanese) 12004, Research Institute of Economy, Trade and Industry (RIETI).

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