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Firm Heterogeneity and the Choice of Internationalization Modes: Statistical Evidence from Japanese Firm-level Data

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  • WAKASUGI Ryuhei
  • TANAKA Ayumu

Abstract

This paper examines how productivity heterogeneity affects the sorting of export and foreign direct investment (FDI) of Japanese firms in North America and Europe. The statistical analysis based on the firm-level data of 12,000 Japanese firms presents new and interesting results: the ranking of productivity corresponds to the mode of internationalization from export to FDI; the productivity of Japanese firms with exports to North America is similar to the productivity of firms with exports to Europe, and the productivity of Japanese FDI firms in North America is also similar to the productivity of FDI firms in Europe; and further the productivity of firms internationalizing in both North America and Europe is remarkably higher than that of firms internationalizing in either North America or Europe, regardless the modes of internationalization, export or FDI. These results conclude that the internationalization modes of Japanese firms in North America and Europe are completely consistent with the theoretical prediction of the HMY model and the fixed costs are critical for determining their choice of internationalization modes.

Suggested Citation

  • WAKASUGI Ryuhei & TANAKA Ayumu, 2009. "Firm Heterogeneity and the Choice of Internationalization Modes: Statistical Evidence from Japanese Firm-level Data," Discussion papers 09024, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:09024
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    File URL: https://www.rieti.go.jp/jp/publications/dp/09e024.pdf
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    References listed on IDEAS

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    1. Grossman, Gene M. & Helpman, Elhanan & Szeidl, Adam, 2006. "Optimal integration strategies for the multinational firm," Journal of International Economics, Elsevier, vol. 70(1), pages 216-238, September.
    2. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 43(3), pages 135-148, May.
    3. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    4. 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.
    5. 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.
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    Cited by:

    1. Thanapol Srithanpong, 2015. "Export Destinations and Plant Heterogeneity: Evidence from Thai Manufacturing," Keio-IES Discussion Paper Series 2015-011, Institute for Economics Studies, Keio University.
    2. Tomoyuki Iida, 2011. "Heterogeneous Firms Serving Developing Countries," Keio/Kyoto Joint Global COE Discussion Paper Series 2011-008, Keio/Kyoto Joint Global COE Program.

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