Exports Versus FDI Revisited: Does Finance Matter?

Buch, Claudia M.; Kesternich, Iris; Lipponer, Alexander; Schnitzer, Monika (November 2010): Exports Versus FDI Revisited: Does Finance Matter? SFB/TR 15 Discussion Paper No. 340

Abstract

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.

• Item Type: Paper (Discussion Paper)
• Keywords: Multinational firms, exports versus FDI, financial constraints
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B7 - Globalisierung und der Anstieg der Vorstandsbezüge; Economics; Economics > Chairs > Seminar for Comparative Economics
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: F2, G2
• Language: English