Quantitative Evaluation of the Determinants of Export and FDI

Firm-level Evidence from Japan

Research output: Contribution to journalArticle

20 Citations (Scopus)

Abstract

Using firm-level data for Japan, this paper examines the determinants of the export and foreign direct investment (FDI) decision. We contribute to the literature by employing a mixed logit model, i.e. a multinomial logit model with random intercepts and random coefficients, to incorporate any unobserved firm heterogeneity and by paying special attention to the quantitative significance of the determinants. We find that while the impact of productivity on the export and FDI decision is positive and statistically significant, it is economically negligible. The effect of firm size, credit constraints and information spillovers from experienced firms is also small in magnitude. A quantitatively dominant determinant of the export and FDI decision is instead the prior status of firms in terms of internationalisation. In addition, the use of the mixed logit model enables us to find a substantial role of unobserved firm characteristics in internationalisation of the firm. These findings suggest that entry costs to foreign markets, which substantially vary in size across firms, play an important role in the export and FDI decision. In addition, given that the negligible effect of productivity and the dominant effect of prior status appear to be more prominent in Japan than in some other countries, this study helps highlight the uniqueness of Japanese firms.

Original languageEnglish
Pages (from-to)355-381
Number of pages27
JournalWorld Economy
Volume34
Issue number3
DOIs
Publication statusPublished - 2011 Mar
Externally publishedYes

Fingerprint

direct investment
foreign investment
Japan
determinants
firm
evaluation
evidence
internationalization
productivity
Foreign direct investment
Quantitative evaluation
Investment decision
credit
Firm size
Internationalization
Mixed logit model
Productivity
market
costs

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics
  • Political Science and International Relations

Cite this

Quantitative Evaluation of the Determinants of Export and FDI : Firm-level Evidence from Japan. / Todo, Yasuyuki.

In: World Economy, Vol. 34, No. 3, 03.2011, p. 355-381.

Research output: Contribution to journalArticle

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