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Export, FDI and Productivity – Evidence for French Firms

  • Vivien Procher

    ()

  • Dirk Engel

The decision of companies to enter international markets, either via exports or foreign direct investment (FDI), has been postulated by the self-sorting model of Helpman, Melitz and Yeaple (HMY, 2004). In the strict sense, the theoretical predictions of HMY only apply to firms that become engaged in marketdriven (horizontal) FDI. Hence, in this paper we apply more precise methodologies to test the HMY hypothesis. First, we classify MNEs according to the underlying motives for investing abroad (market-driven vs. resource-driven FDI). Second, we highlight the role of productivity growth in the post-entry period.Our findings suggest that productivity affects the FDI decision considerably whereas expected feedback and learning effects of FDI on productivity are remarkably lower.We further detect that more market-driven MNEs exhibit a higher productivity than comparatively less market-driven MNEs.

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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0111.

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Length: 39 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:rwi:repape:0111
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  1. Alexander HIJZEN & INUI Tomohiko & TODO Yasuyuki, 2007. "The Effects of Multinational Production on Domestic Performance: Evidence from Japanese Firms," Discussion papers 07006, Research Institute of Economy, Trade and Industry (RIETI).
  2. Giorgio Barba Navaretti & Davide Castellani & Anne-Célia Disdier, 2006. "How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy," Development Working Papers 215, Centro Studi Luca d\'Agliano, University of Milano.
  3. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  4. Arnold, Jens Matthias & Hussinger, Katrin, 2006. "Exports versus FDI in German manufacturing: firm performance and participation in international markets," Discussion Paper Series 1: Economic Studies 2006,04, Deutsche Bundesbank, Research Centre.
  5. Muendler, Marc-Andreas & Becker, Sascha O., 2007. "The effect of FDI on job separation," Discussion Paper Series 1: Economic Studies 2007,01, Deutsche Bundesbank, Research Centre.
  6. Laura Alfaro & Andrew Charlton, 2007. "Intra-industry foreign direct investment," LSE Research Online Documents on Economics 19690, London School of Economics and Political Science, LSE Library.
  7. Joachim Wagner, 2005. "Exports and Productivity: A survey of the evidence from firm level data," Working Paper Series in Economics 4, University of Lüneburg, Institute of Economics.
  8. Amil Petrin & Brian P. Poi & James Levinsohn, 2004. "Production function estimation in Stata using inputs to control for unobservables," Stata Journal, StataCorp LP, vol. 4(2), pages 113-123, June.
  9. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  10. GIRMA, Sourafel & GOERG, Holger & STROBL, Eric, 2004. "Exports, international investment, and plant performance : evidence from a non-parametric test," CORE Discussion Papers 2004009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Jozef Konings & Alan Patrick Murphy, 2006. "Do Multinational Enterprises Relocate Employment to Low-Wage Regions? Evidence from European Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(2), pages 267-286, July.
  12. 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.
  13. Davide Castellani & Antonello Zanfei, 2007. "Internationalisation, Innovation and Productivity: How Do Firms Differ in Italy?," The World Economy, Wiley Blackwell, vol. 30(1), pages 156-176, 01.
  14. Görg, Holger & Hanley, Aoife & Strobl, Eric, 2007. "Productivity Effects of International Outsourcing: Evidence from Plant Level Data," CEPR Discussion Papers 6361, C.E.P.R. Discussion Papers.
  15. Sourafel Girma & Richard Kneller & Mauro Pisu, 2005. "Exports versus FDI: An Empirical Test," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(2), pages 193-218, July.
  16. Kleinert, Jörn & Toubal, Farid, 2007. "The impact of locating production abroad on activities at home," Tübinger Diskussionsbeiträge 314, University of Tübingen, School of Business and Economics.
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