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Internationalization choices: an ordered probit analysis at industry-level

  • Filomena Pietrovito


    (Universit… del Molise)

  • Alberto Franco Pozzolo


    (University of Molise, Centro Studi Luca d'Agliano)

  • Luca Salvatici


    (Universit… di Roma Tre, Dipartimento di Economia)

Trade theory traces back different patterns of internationalization to heterogeneity between firms, measured both through differences in productivity levels and size. In this paper we analyze the link between heterogeneity within sectors and internationalization choices, namely trade and foreign direct investments (FDI) for a large sample of countries and industries between 1994 and 2004. The focus of our paper is on the role played by average productivity level and the distribution of firms by size in explaining differences across sectors and countries in the extensive margin of internationalization (i.e., the number of foreign nations where firms from a given sector and country have expanded abroad). By performing an ordered probit analysis, and controlling for other factors affecting the patterns of internationalization, we confirm that industries with higher productivity levels and with a distribution of firms shifted toward large firms are more prone to internationalize in foreign markets through both trade and FDI. Moreover, the relative impact of average productivity and firm size on FDI is larger than that on trade. These results are robust to different measures of productivity and the distribution of firms.

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Paper provided by Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences in its series Mo.Fi.R. Working Papers with number 77.

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Length: 36
Date of creation: Jan 2013
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Handle: RePEc:anc:wmofir:77
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