International Activities Of Firms Research Articles

Fencing or balancing? An exploratory study of Australian and New Zealand exporters’ strategic responses during the US-China trade war

PurposeA key challenge for exporters and international marketing/purchasing managers is formulating strategic responses to deal with geopolitical disruptions during a trade war between superpowers. While past studies provide insightful analysis of the influence of changes in the institutional environment (regulatory pressures) on national and firm-level trade activities, they tend to ignore the association between inward (sourcing) or outward (export) international activities of firms during a trade war. In this study, we aim to explore various strategic options employed by third-party SME exporters in response to geopolitical disruptions, institutional pressures and constraints during a trade war.Design/methodology/approachWe adopted a qualitative methodology and applied a hermeneutical approach in collecting, analysing and theorising interview findings. We conducted interviews with 15 owners or senior managers from 12 Australian and New Zealand exporters that exported or sourced significantly from at least one party of the trade war, the USA or China, between 2018 and 2020.FindingsOur study developed a typology of fencing vs. balancing for explaining third-party SME exporters’ response strategies in terms of export market and international sourcing locations during a trade war. Fencing strategy centres on location choice decisions based on a fence or a secure buffer zone. Balancing strategy focuses on leveraging opportunities outside the conflict zone, i.e. third-party countries. Our study finds that exporters’ location choice decisions are influenced by a number of institutional factors during the trade war.Research limitations/implicationsFirstly, our study examined only the early phase of the trade war under the “Trump” era. Future research may consider a longitudinal study design that examines exporters’ responses to global political uncertainty over a longer term. Secondly, we chose Australia and New Zealand as the focal context of this study. Future research could investigate exporters from other third-party countries that have different institutional conditions during the US-China trade war.Practical implicationsFirstly, an exporting firm should monitor and assess closely the wider changes in international relations between their home country’s major security partner and major trading partner, and the impact of these changes on the political risks of operating in international locations. Secondly, as the trade war intensifies, the fencing option needs to be given a greater weight than the balancing option in the strategic decision making of an exporter from a third-party country. Lastly, we encourage marketers and managers to reflect on and differentiate short-term and long-term benefits in strategic market-sourcing location decisions.Originality/valueOur study makes a pioneering effort to theorise the linkages between institutional factors and the combined evaluation of export market selection and sourcing location selection choices under global political uncertainty based on the institution-based view. We present a conceptual framework highlighting the importance of institutional avoidance, embeddedness, comparative institutional advantages and multiple institutional logics for SME exporters’ international location selections during the trade war. Furthermore, we combine these institutional factors into two overarching constructs namely institutional buffer and institutional pluralism.

Website Premia for Extensive Margins of International Firm Activities: Evidence for SMEs from 34 Countries

This paper uses firm-level data from the Flash Eurobarometer 421 survey conducted in June 2015 in 34 European countries to investigate the link between having a website and international firm activities in small- and medium-sized enterprises (SMEs). We find that firms that are present on the web more often export, import, engage in research and development cooperation with international partners, work as subcontractors for firms from other countries, use firms in other countries as subcontractors, and perform foreign direct investments—both inside and outside the European Union. The estimated website premia are statistically highly significant after controlling for firm size, country, and sector of economic activity. Furthermore, the size of these premia can be considered to be large. Internationally active firms tend to have a website.

International firm activities, R&D, and productivity: Evidence from Indian manufacturing firms

This study investigates whether R&D intensity has a moderating effect on the links between international firm activities (viz. exports, trade in imported inputs and capital goods, and foreign direct investment) and productivity. We also explore whether the moderating effect of R&D intensity vis-à-vis the underlying relationships differs for firms in high-tech versus low-tech sectors. The results show that, unlike low-tech firms, high-tech firms with higher R&D intensity in the previous period derive substantial productivity gains from FDI and the utilisation of imported inputs and capital goods. Furthermore, compared with internationally active high-tech firms, domestic high-tech firms have lower productivity gains from higher R&D intensity in the previous period, while the impact of higher R&D intensity on domestic low-tech firms is insignificant. Policies that create an enabling environment for public support for R&D, including the provision of R&D tax incentives targeted at internationally active high-tech firms, would help in enhancing productivity.

IT2 Hybrid Decision-Making Approach to Performance Measurement of Internationalized Firms in the Baltic States

International activities of firms contribute to environmental socio-economic development and have a positive influence on prosperity of countries. The novelty of this study is to extend prevailing theory on the performance measurement of internationalized firms by suggesting a hybrid decision-making model based on interval type 2 fuzzy sets for the Baltic states. The integrated method is defined as the interval type-2 (IT2) decision making trial and evaluation laboratory qualitative flexible multiple criteria method (DEMATEL-QUALIFLEX). IT2 DEMATEL is used for weighting each criterion of internationalized firms and IT2 QUALIFLEX is applied for ranking the Baltic states, respectively. Within this context, six different criteria are defined for ranking the internationalized firms of the Baltic states. The ranking of all three countries enable us to conclude that Estonia demonstrates the best results of internationalized firms. Meanwhile, Latvia has the worst performance of internationalized firms. The findings are useful for decision makers responsible for supportive policies focused on the research and development (R&D) and internationalization of firms. The implications for managers lie in the awareness of necessary conditions for successful internationalization. The study extends prevailing knowledge on the performance measurement of internationalized firms and provides findings on multinational companies (MNCs) in the Baltic states’ context.

How does export compliance influence the internationalization of firms: is it a thread or an opportunity?

Internationalization is a complex process, in which firms face various challenges that may lead to opportunities or threads. One of these challenges is export compliance. The objective of this paper is to disentangle the nature of export compliance and its function in international entrepreneurship. This study outlines a perspective on the export control system, discusses the most relative legislation, reveals the consequences of non-compliance and provides a case study and finally explains the function of export compliance in the international activities of firms.

Factors Stimulating Internationalisation of Firms: An Attempted Holistic Synthesis

Objective : The main goal of this paper is the critical and synthetic analysis of internationalisation process factors, with reference to business management. It presents a systematic review of the most important relational ideas in regard to factors of firm-level internationalisation. Research Design & Methods : The text includes the synthesis of previous academic studies and results of empirical researches on internationalisation factors. Findings: The motives for going international are explained in reference to external and internal factors. Different definitions of understanding external factors of internationalisation of firms are discussed, among them (i) framework factors (market, cost, governmental, competitive and additional factors), (ii) conditioning factors (factor and demand conditions, related and supporting industries, firm strategy, structure and rivalry) as well as (iii) general environment factors (economic environment, demographic environment, political and legal environment, technological, natural and socio-cultural environment). Implications & Recommendations: Internal factors of internationalisation are mostly rooted in the resource-based view. Motives for going international mainly depend on top management team, international resources and firms specifics. Contribution & Value Added: The paper underlines that there are numerous factors, both external and internal, which influence international activities of firms. Despite the fact that the decision to internationalize is focused on specific motives and goals, the role of managers is crucial.

Environmental Protection by Foreign Firms in German Manufacturing: Does the Country of Origin Matter?

Only recently have the aspects of pollution and environmental protection entered into the empirical literature about international firm activities. The present paper is the first firmlevel study on the link between foreign ownership and environmental protection in Germany. We find that, <italic>ceteris paribus</italic>, foreign owned firms in Germany are more likely to invest in environmental protection. They also invest on a larger scale in terms of addon measures as well as integrated measures. These results are robust against different measures, different time periods, different control groups, and selection issues arising from fractional response data. Once we control for productivity levels, the differences become less straightforward. However, the higher probability of foreign firms’ making general as well as integrated environmental protection investments and the tilt of their composition towards integrated measures remain. We cannot find any support for differences among foreign firms by country of origin. This can be interpreted as support for the new institutionalist hypothesis of international convergence of management practices in the field of environmental management due to normative pressure and <italic>de facto</italic> standards at the global level. <bold>Zusammenfassung</bold> Die Studie präsentiert die erste ökonometrische Untersuchung des Zusammenhangs von Umweltschutzinvestitionen und Auslandskontrolle in Deutschland auf Unternehmensebene. Die Ergebnisse zeigen, dass auslandskontrollierte Unternehmen in Deutschland ceteris paribus häufiger und in größerem Ausmaß in Umweltschutzmaßnahmen investieren als aus dem Inland kontrollierte Unternehmen. Dies betrifft sowohl integrierte als auch “end-of-pipe“ Maßnahmen. Die Unterschiede im Investitionsvolumen verringern sich deutlich, sobald individuelle Produktivitätslevel berücksichtigt werden. Keine Unterschiede im Investitionsverhalten bestehen zwischen einzelnen Herkunftsländern der Kontrolle innerhalb der Gruppe auslandskontrollierter Unternehmen. Somit weisen die Ergebnisse auf eine fortgeschrittene Konvergenz internationaler Managementpraktiken im Bereich Umweltmanagement hin. <italic>JEL Classification: F12, Q52, Q55, Q56</italic>

New Methods for the Analysis of Links between International Firm Activities and Firm Performance: A Practitioner's Guide

AbstractThis paper is a non‐technical introduction to the use of three micro‐econometric tools that have only recently been applied in empirical investigations of the links between international firm activities and firm performance. It shows why it is important to use these methods, how to use them in practice and which new insights are found in empirical applications. Topics include the role of extremely different firms (or outliers) in the computation of performance premia of internationally active firms; different performance premia over the distribution of the performance variable when unobserved heterogeneity matters; and the analysis of causal effects of different intensities of international firm activity on firm performance.

Exports, foreign direct investments and productivity: are services firms different?

This paper contributes to the literature on international firm activities by providing the first evidence on the link between productivity and both exports and foreign direct investment (FDI) in services firms from a highly developed country. It uses unique new data from Germany, one of the leading actors in the world market for services. Statistical tests and regression analyses indicate that the productivity pecking order found in numerous studies using data for firms from manufacturing industries – where the firms with the highest productivity engage in FDI while the least productive firms serve the home market only and the productivity of exporting firms is in between – does not exist among firms from services industries. There is evidence that firms with FDI are less productive than firms that export; this finding is in line with recent empirical results reported for software firms from India.

Micro-econometric studies of international firm activities and firm performance: introduction by guest editor

The study of causes and consequences of various forms of international firm activities is a very active sub-field of international economics. Micro-economic models of internationally active heterogeneous firms (surveyed by Redding (2011)) guide micro-econometric studies (surveyed by Wagner (2012)) that use longitudinal data at firm level to investigate empirically the testable implications of these models; stylized facts uncovered by looking at the micro data help theorists to build formal models based on assumptions that are not at odds with the real world. Members of the International Study Group on Exports and Productivity—ISGEP contribute to this literature for many years, and they gather regularly to discuss new results at workshops. This special issue of the Review of World Economics contains eight papers presented as preliminary versions at the workshop held in September 2011 at the Leuphana University Luneburg, Germany. The papers in this special issue deal with various aspects of causes and consequences of international firm activities: Two papers deal with exports. Manjon et al. (2013) discuss the issue of ‘‘learning by exporting’’ and report gains in productivity for Spanish firms after starting to export. Amador and Opromolla (2013) use data for the universe of export transaction of firms from Portugal to study the joint destination and product strategies of exporters; they uncover a number of hitherto unknown facts based on this new type of transaction-level data. Three papers investigate exports and imports at the firm level. Aristei et al. (2013) use data for 27 Eastern European and Central Asian countries to estimate a bivariate probit model of exporting and importing. They find that firms’ exporting

The impact of the institution of patent protection and enforcement on entry mode strategy: A panel data investigation of U.S. firms

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement has engendered a harmonisation of patent laws across countries but the extent of enforcement of these laws continues to vary. This study investigates the degree to which de jure book law protection of patents and de facto enforcement of these laws influences the propensity of firms to exploit their patented technology in foreign markets with company-owned operations or unrelated concerns using licensing agreements. Analyzing data on royalty and fee receipts of U.S. parent companies from affiliates and non-affiliated parties abroad from 1998 to 2007, and using separate measures for de jure and de facto patent protection and enforcement, we find that strengthening de jure protection induces greater affiliate licensing while strengthening de facto enforcement induces non-affiliate licensing. We conclude by observing that greater account should be taken of de facto enforcement measures when investigating the role of institutions on the international activities of firms.

Robust Estimation of Linear Fixed Effects Panel Data Models with an Application to the Exporter Productivity Premium

Summary In empirical studies often the values of some variables for some observations are much larger or smaller than the values for the other observations in the sample. These extreme observations, or outliers, often have a large impact on the results of statistical analyses. Conclusions based on a sample with and without these units may differ drastically. While applied researchers are usually aware of this the detection of outliers and their appropriate treatment is often dealt with in a rather sloppy manner. One reason for this habit seems to be the lack of availability of appropriate canned programs for robust methods that can be used in the presence of outliers. Our paper intents to improve on this situation by presenting a highly robust method for estimation of the popular linear fixed effects panel data model and to supply Stata code for it. In an application from the field of the micro-econometrics of international firm activities we demonstrate that outliers can indeed drive results.

From Estimation Results to Stylized Facts Twelve Recommendations for Empirical Research in International Activities of Heterogeneous Firms

Heterogeneous firms are at the heart of both the New New International Trade Theory and the Micro-econometrics of International Firm Activities. One important aim of micro-econometric studies is to uncover stylized facts that hold over space and time, and that can both inspire theoretical models that are based on “realistic” assumptions, and inform policy debates in an evidence-based way. Which results from the thousands of empirical estimates reported in the literature on the micro-econometrics of international firm activities do we consider as convincing? Based on my own experience from the last twenty years I use the opportunity of this paper to make twelve recommendations that, hopefully, will help to find the right way on the thorny road from estimation results to stylized facts. I will deal with the following topics: comparisons of means vs. comparisons of distributions; extremely different firms, or outliers; unobserved heterogeneity; simultaneous occurrence of differences across quantiles, outliers, and unobserved heterogeneity; heterogeneous effects of international firm activities on firm performance; replication; within-study replication by international research teams; meta-analysis; and talking to practitioners.

Exports, Foreign Direct Investments and Productivity: Are Services Firms Different?

This paper contributes to the literature on international firm activities and firm performance by providing the first evidence on the link of productivity and both exports and foreign direct investment (fdi) in services firms from a highly developed country. It uses unique new data from Germany - one of the leading actors on the world market for services - that merge information from regular surveys and from a one-time special purpose survey performed by the Statistical Offices. Descriptive statistics, parametric and non-parametric statistical tests and regression analyses (with and without explicitly taking differences along the conditional productivity distribution and firms with extreme values, or outliers, into account) indicate that the productivity pecking order found in numerous studies using data for firms from manufacturing industries – where the firms with the highest productivity engage in fdi while the least productive firms serve the home market only and the productivity of exporting firms is in between – does not exist among firms from services industries. In line with the theoretical model and the empirical results for software firms from India provided by Bhattacharya, Patnaik and Shah (2010) there is evidence that firms with fdi are less productive than firms that export.

Robust Estimation of Linear Fixed Effects Panel Data Models with an Application to the Exporter Productivity Premium

In empirical studies it often happens that some variables for some units are far away from the other observations in the sample. These extreme observations, or outliers, often have a large impact on the results of statistical analyses – conclusions based on a sample with and without these units may differ drastically. While applied researchers tend to be aware of this, the detection of outliers and their appropriate treatment is often dealt with in a rather sloppy manner. One reason for this habit seems to be the lack of availability of appropriate canned programs for robust methods that can be used in the presence of outliers. Our paper intents to improve on this situation by presenting a highly robust method for estimation of the popular linear fixed effects panel data model, and to supply Stata code for it. In an application from the field of the micro-econometrics of international firm activities we demonstrate that outliers can indeed drive results.

From Estimation Results to Stylized Facts: Twelve Recommendations for Empirical Research in International Activities of Heterogeneous Firms

Heterogeneous firms are at the heart of both the New New International Trade Theory and the Micro-econometrics of International Firm Activities. One important aim of micro-econometric studies is to uncover stylized facts that hold over space and time, and that can both inspire theoretical models that are based on “realistic” assumptions, and inform policy debates in an evidence-based way. Which results from the thousands of empirical estimates reported in the literature on the micro-econometrics of international firm activities do we consider as convincing? Based on my own experience from the last twenty years I use the opportunity of this lecture to make twelve recommendations that, hopefully, will help to find the right way on the thorny road from estimation results to stylized facts. I will deal with the following topics: comparisons of means vs. comparisons of distributions; extremely different firms, or outliers; unobserved heterogeneity; simultaneous occurrence of differences across quantiles, outliers, and unobserved heterogeneity; heterogeneous effects of international firm activities on firm performance; replication; within-study replication by international research teams; meta-analysis; and talking to practitioners.

Introduction to the Special Issue: Causes and Consequences of International Firm Activities – Evidence from Micro Data

The study of international firm activities forms a very active sub-field of international economics with direct implications for economic policy. In this literature, micro-econometric investigations using longitudinal data at the firm level and micro-economic modelling of heterogeneous firms that are involved in various forms of international activities mutually fertilize each other (see the surveys by Greenaway and Kneller (2007), Helpman (2006), Lopez (2005), and Wagner (2007)). Members of The International Study Group on Exports and Productivity – ISGEP contribute to this literature, and new results are presented and discussed at the workshops of this group regularly. 1 Earlier versions of three of the four papers in this issue were presented at the third ISGEP workshop at the Economic and Social Research Institute (ESRI) in Dublin in February 2009. 2 Sourafel Girma, Holger Gorg and Joachim Wagner use newly available representative panel data for manufacturing enterprises in West and East Germany to investigate the link between production-related subsidies and exports. They report that only a small fraction of enterprises is subsidized, and that exports and subsidies are positively related. Using a matching approach to investigate the causal effect of subsidies on export activities they find no impact of subsidies on the probability to start exporting, and only weak evidence for an impact of subsidies on the share of exports in total sales in West Germany but no evidence in East Germany.

Is the influence of the industrial district on international activities being eroded by globalization?: Evidence from a traditional manufacturing industry

This study provides insight into the impact of industrial districts on the international activities of firms, in the particular context of one traditional manufacturing industry: the Spanish home-textile industry. Using a sample of 128 manufacturing firms, the paper shows how location influences the timing and levels of exports and imports. Moreover, our results demonstrate how these influences have been diluted in recent years as the home-textile industry becomes more involved in the global arena. Our findings challenge some key arguments exploring the advantages of the district in the international activities of firms; in particular, first, in questioning the capacity of the district to prevent international sourcing, and second, its vulnerability to the threats created by the growing integration of the world economy.

The effect of national IP enforcement on the IP management strategies of firms: the case of India and China

Many empirical studies on the effect of a nations' intellectual property institution (IPI) on the international activities of firms rely upon various indices, or measures, of IP strength. These are generally derived from a nation's substantive and subordinate laws and regulations that govern terms of IP protection and enforcement procedures. However, most extant measures focus on the strength of IP 'protection' in countries and are weak at capturing the IP 'enforcement' dimension. This study investigates and compares institutional enforcement behaviour in India and China as experienced and perceived by British firms and how this influences their IP management strategies. Findings indicate that institutional enforcement behaviour has a greater impact on firms' IP management strategies than do enacted IP protection and enforcement laws and regulations. New IP measures may be needed that better capture this important dimension.

Exports, Imports, and Productivity at the Firm Level. An International Perspective: Introduction by Guest Editor

About fifteen years ago Bernard and Jensen (1995) published a Brookings Paper that started a field that today is known as the micro-economics of international firm activities. This literature comprises a huge number of micro-econometric studies that use longitudinal data at the firm (enterprise or plant) level to demonstrate that firms that are active on international markets as exporters, importers, or multinational firms differ in a systematic way from firms that serve the national market only. Inspired by these empirical regularities theoretical models were developed that explicitly deal with heterogeneous firms involved in international activities (or not). Micro-econometric investigations and micro-economic modelling in this field mutually fertilize each other, leading to an exciting literature (surveyed in parts by Greenaway and Kneller (2007), Helpman (2006), Lopez (2005), and Wagner (2007)). A core finding of both the empirical investigations and the theoretical models here is that internationally active firms tend to be, among other things, more productive than firms that produce for the national market only. While most of the results are in line with this, answers to several related questions are still lacking: What determines the size of these productivity differentials? Are they different between countries, and if so, why? Where do they come from—do more productive firms self-select into international activities, or does exporting cause an increase in productivity via learning effects, or is both the case? The papers in this special issue deal with these and related questions in micro-econometric studies using large comprehensive sets of longitudinal firm level data from many countries. Although a large number of empirical studies based on firm level data from many countries produced comprehensive evidence regarding significance and size of exporter productivity premia, the differences between premia estimated for different countries remain unexplained. Are they dif-