The internationalization process of firms: From exports to FDI

Paola Conconi, Andre Sapir and Maurizio Zanardi

Journal of International Economics, 2016, vol. 99, issue C, 16-30

Abstract: We examine how uncertainty affects firms' internationalization choices. We begin by unveiling a new empirical regularity: using a unique dataset that allows us to study the dynamics of firms' exports and foreign direct investments (FDI) in individual destinations, we show that most firms serve a market via exports before investing there. To rationalize this pattern, we describe a model in which firms are uncertain about their profitability in a foreign market and may experiment via exports before engaging in FDI. In line with this idea, we show that the probability that a firm starts investing in a foreign country increases with its export experience in that country. In more uncertain destinations, firms delay FDI entry, experimenting longer with exports before establishing foreign affiliates.

Keywords: Exports; FDI; Uncertainty; Experimentation (search for similar items in EconPapers)
JEL-codes: D21 F10 F13 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (112)

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Related works:
Working Paper: The Internationalization Process of Firms: from Exports to FDI (2013)
Working Paper: The Internationalization Process of Firms: from Exports to FDI (2013)
Working Paper: The internationalization process of firms: From exports to FDI ? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:99:y:2016:i:c:p:16-30

DOI: 10.1016/j.jinteco.2015.12.004

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