Exports Versus FDI Revisited: Does Finance Matter?
Iris Kesternich (),
Alexander Lipponer () and
Monika Schnitzer ()
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich
This paper explores the impact of financial constraints on the internationalization strategies of firms. It contributes to the literature by focusing on three aspects: First, the paper studies the impact of financial constraints on exporting relative to FDI. Consistent with theory, the empirical results confirm that the impact of financial constraints is stronger for FDI than for exporting. Second, the paper analyzes the extensive and the intensive margins and finds that financial frictions matter for both. Third, the paper explores the impact on manufacturing as compared to service industries and shows that firms in service industries are affected more than firms in manufacturing. The paper also identifies a threshold effect: Financial constraints do not matter for small firms whose productivity seems to be too low to consider international expansions.
Keywords: Multinational firms; exports versus FDI; financial constraints (search for similar items in EconPapers)
JEL-codes: F2 G2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-int
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Working Paper: Exports Versus FDI Revisited: Does Finance Matter? (2010)
Working Paper: Exports versus FDI revisited: does finance matter? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:340
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