Multinational Firms and Export Dynamics

This paper provides new evidence on the dynamics of multinational firms and exporters based on firm-level panel data for Norway, France, and Germany. First, exit rates for new exporters almost triple the ones for new affiliates of multinational firms, while multinational firms with previous export experience show the lowest exit rates. Second, new affiliates of multinational firms have flatter sales growth profiles than exporters. Finally, firms that transition from exporting to FDI are larger than continuing multinational firms. We show that a simple dynamic extension of a model in which firms choose to serve a foreign market through exports or affiliate sales facing a "proximity-concentration tradeoff", as in Helpman, Melitz, and Yeaple (2004), captures these patterns quali- tatively. We show that quantitatively the model goes a long way in explaining the dynamic patterns observed in the data.