Internationalization choices and Italian firm performance during the crisis

In this paper we focus on the relationship between internationalization choices and performance of Italian firms during the first period of the financial crisis (2007-2010). Making use of a new database matching four firm-level datasets provided by the Italian National Statistical Institute (ISTAT), we firstly build a 6-class taxonomy of firms’ internationalization activities. Secondly, we estimate firms’ performance – in terms of employment and value added dynamics – as a function of internationalization forms. In particular, we assess the effects of the shifts across the taxonomy classes on firms’ performance, also estimating Propensity score and Heckman selection models in order to control for endogeneity and sample selection problems. Descriptive analyses confirm that firms adopting more complex forms of internationalization (e.g. offshoring, or exporting worldwide) are more efficient and export a wider range of goods than traditional exporters. Indeed, over the period 2007-2010, Italian firms moved (on average) towards more complex forms of internationalization. Empirical analysis found that these upward changes are associated to positive employment and value added dynamics at firm level, also in a period characterised by the 2009 trade collapse. These findings put additional emphasis on the issue of the diversification of both products and markets as a goal to be pursued by firms even in times of crisis, as the current ones, to remain competitive and make profits.