Discussion Paper Details

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Title: The ladder of internationalization modes: Evidence from European firms

Author(s): Gábor Békés and Balázs Muraközy

Publication Date: January 2018

Keyword(s): export, FDI, Firm Heterogeneity, internationalization mode, ordered logit, Outsourcing and sorting

Programme Area(s): International Trade and Regional Economics

Abstract: How do firms enter international markets? To answer this question, this paper uses a unique multi-country firm-level dataset which, besides direct exporting and FDI, provides explicit information on a number of internationalization modes: indirect exporting, outsourced manufacturing and service FDI. We present a theoretical framework in which modes requiring higher and higher commitment have progressively higher fixed and lower marginal costs. By estimating multinomial and ordered logit models, we present evidence in line with such a sorting framework with respect to TFP and innovativeness. We identify three 'clusters' of modes: indirect exporters are similar to non-exporters, direct exporters and outsourced manufacturers constitute a second cluster while service and manufacturing FDI are the most demanding internationalization modes.

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Bibliographic Reference

Békés, G and Muraközy, B. 2018. 'The ladder of internationalization modes: Evidence from European firms'. London, Centre for Economic Policy Research.