Productivity, Growth, and Internationalisation: The Case of German and British High Techs

International engagement is often expected to improve firm performance. Especially for small technology-oriented firms, export activities may be important, being regarded as one way to amortise these firms? high product research and development costs. This paper examines the relationship between international business activities and firm performance using a sample of about 200 young high-tech firms in Germany and the UK that were contacted by two surveys in 1997 and 2003. I find out that the performance enhancing effects of internationalisation that were still observed in 1997 are in fact restricted to an early stage of the firms? life cycles and disappear when technology-oriented firms become mature. The results are in line with many other studies: Firms exhibiting superior performance are or will become exporters. --High technology industries,internationalisation,firm growth,productivity,switching

Hidden champions - how young and small technology-oriented firms can attain high export-sales ratios

Determinants of a firm?s export-sales ratio (degree of internationalisation) are frequently discussed in the literature related to individual firms? export activities. Stylised facts show a positive relationship between firm size and firm age on the one hand and the firm?s export-sales ratio on the other hand. However, anecdotic evidence and recent empirical results revealed that it is not size or age per se that leads to a high export-sales ratio. This paper analyses the export-sales ratio of a sample of young technology-oriented firms in Germany and the UK. The empirical results confirm that neither youth nor smallness are necessarily an obstacle to realising a high degree of internationalisation. However, this requires that the firms possess firm-specific assets in order to overcome barriers to entry into the foreign market. These firm-specific assets may be acquired via conducting own R&D activities, buying novel technology from other companies, or by employing internationally experienced managers. --High-technology industries,export-sales ratio,fractional logit model

The Change of Sales Modes in International Markets: Empirical Results for German and British High-Tech Firms

The choice of the appropriate sales mode belongs to the firm?s most important strategic decisions after entering into a foreign market. Thus, it is important that the selected foreign sales mode best suits a firm?s available resources and capabilities. However, these resources and capabilities change over time. Therefore, it might be necessary for a firm to adjust its foreign sales mode to these changing firm-specific conditions. Using a longitudinal data set of newly founded technology-based firms in Germany and the UK, this paper applies logistic regressions and analyses empirically the probabilities of changing between the two sales modes most frequently used by the sampled exporters: direct exports and exporting via an intermediary. The estimation results confirm the importance of the firm?s physical and intangible resources as well as the influence of transaction-specific assets on a sales mode change. However, the effects of the latter factors might be dominated by strategic considerations that are not covered by our data. For example, a young high-tech firm will resort to an intermediary regardless of its resources and transaction-specific assets if this is the only way of coming into contact with foreign customers. --High technology industries,internationalisation,sales modes

Exports and Profitability: First Evidence for German Manufacturing Firms

Using unique recently released nationally representative high-quality longitudinal data at the enterprise level for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for selfselection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 percent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means, that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms. --exports,profitability,micro data,Germany

Exports and Profitability: First Evidence for German Manufacturing Firms

Using unique recently released nationally representative high-quality longitudinal data at the enterprise level for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for self-selection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 percent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means, that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms.exports, profitability, micro data, Germany

Exports and Profitability - First Evidence for German Manufacturing Firms

Using unique recently released nationally representative high-quality longitudinal data at the enterprise level for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for selfselection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 percent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means, that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms.exports, profitability, micro data, Germany

Hidden Champions – How Young and Small Technology-Oriented Firms Can Attain High Export-Sales Ratios

Determinants of a firm's export-sales ratio (degree of internationalisation) are frequently discussed in the literature related to individual firms' export activities. Stylised facts show a positive relationship between firm size and firm age on the one hand and the firm's export-sales ratio on the other hand. However, anecdotic evidence and recent empirical results revealed that it is not size or age per se that leads to a high export-sales ratio. This paper analyses the export-sales ratio of a sample of young technology-oriented firms in Germany and the UK. The empirical results confirm that neither youth nor smallness are necessarily an obstacle to realising a high degree of internationalisation. However, this requires that the firms possess firm-specific assets in order to overcome barriers to entry into the foreign market. These firm-specific assets may be acquired via conducting own R&D activities, buying novel technology from other companies, or by employing internationally experienced managers

Stepping In and Out of the International Market: Internationalisation of Technology-Oriented Firms in Germany and the UK

For small high-tech firms international orientation is regarded as crucial for growth and long-term survival. Even newly founded technology based firms (NTBFs) are often internationally active shortly after their inception ("born globals"). However, in order to create jobs and have a sustainable influence on (macro)economic development, continuous growth of NTBFs is needed and research must focus on the continuous role of internationalisation. Based on longitudinal data, this paper examines empirically the long-term internationalisation behaviour of German and British technology-oriented firms founded between 1987 and 1996. Applying logit models, I am able to identify firm-specific success factors that influence the probability of entry into and exit from the international market. The results show, for instance, that firms can overcome high entry costs by acquiring firm-specific assets. Similarly, firm-specific resources prevent high-tech companies from exiting the international market. The strategic role of investment in R&D is stressed in particular by the data

The Export-Growth Relationship : Estimating a Dose-Response Function

The relationship between individual firms' export behaviour and firm performance has been studied extensively in the economic literature. However, most studies from the field of economics only distinguish between exporting and non-exporting companies, using the firms' export status as a binary treatment variable and comparing the performance of exporting and non-exporting firms. This paper introduces the newly developed generalised propensity score (GPS) methodology to the literature of individual firms' export behaviour. Instead of a binary treatment variable, the GPS method allows for continuous treatment, that is, different levels of the firms' export activities. Based on the GPS methodology, a dose-response function is estimated, depicting the relationship between the firms' pre-treatment export-sales ratio and their subsequent sales growth rate as a measure of firm performance

The Change of Sales Modes in International Markets – Empirical Results for German and British High-Tech Firms

The choice of the appropriate sales mode belongs to the firm's most important strategic decisions after entering into a foreign market. Thus, it is important that the selected foreign sales mode best suits a firm's available resources and capabilities. However, these resources and capabilities change over time. Therefore, it might be necessary for a firm to adjust its foreign sales mode to these changing firm-specific conditions. Using a longitudinal data set of newly founded technology-based firms in Germany and the UK, this paper applies logistic regressions and analyses empirically the probabilities of changing between the two sales modes most frequently used by the sampled exporters: direct exports and exporting via an intermediary. The estimation results confirm the importance of the firm's physical and intangible resources as well as the influence of transaction-specific assets on a sales mode change. However, the effects of the latter factors might be dominated by strategic considerations that are not covered by our data. For example, a young high-tech firm will resort to an intermediary regardless of its resources and transaction-specific assets if this is the only way of coming into contact with foreign customers