Exports versus FDI in German Manufacturing: Firm Performance and Participation in International Markets |
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| Authors: | Jens M Arnold Katrin Hussinger |
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| Institution: | 1. OECD Economics Department, 2 rue André‐Pascal, F‐75775 Paris Cedex 16;2. Department of Organization and Strategy, Maastricht University, Katholieke Universiteit Leuven, and Center for European Economic Research (ZEW), Netherlands;3. We wish to thank Beata Javorcik and Gianmarco Ottaviano for useful comments, and Thorsten Doherr and Fred Ramb for assistance with data and procedures. Katrin Hussinger thanks the Deutsche Bundesbank for hospitality, and gratefully acknowledges financial support from the Centre for European Economic Research as well as under grant KUL‐OT/04/07A. All remaining errors are ours. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and do not necessarily represent those of the OECD or its member countries. |
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| Abstract: | Recent theoretical work has been able to explain how even within narrowly defined industries, firms can exhibit heterogeneous degrees of participation in international commerce. Differences in productivity between firms are the principal explanation offered by theory to explain heterogeneity with respect to international commerce. In particular, theory predicts that the least productive firms will produce for the domestic market only, while better performers engage in export activities, and the top firms establish foreign subsidiaries. This paper presents an empirical test of the relationship between productivity and patterns of international trade and production. Using German firm‐level data from 1996 to 2002, we test the predicted rank ordering of productivity according to firms’ trade pattern by examining the distribution functions of the three subsets of firms for stochastic dominance. Our results are generally consistent with the predictions from theory, and document significant productivity differences according to trade patterns. |
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