Exporting and capital investment: On the strategic behavior of exporters.

By exporting, firms sell in markets whose business cycles are not perfectly correlated, and so can be expected to have more stable cash flows. If companies are liquidity constrained, this stability of cash flows can provide exporters with certain advantages over firms that operate solely in a domestic market. For instance, under the existence of liquidity constraints, more stable cash flows should foster more stable capital investments. Moreover, the expectation of more stable future cash flows and the information signal from commencing exporting can lessen the severity of liquidity constraints for exporters compared to non-exporters. We test these arguments by examining a stratified representative sample of the Spanish manufacturing sector from 1990 to 1998. Our results suggest that exporters' cash flows and capital investments are more stable than non-exporters'. Moreover, we find that liquidity constraints are less binding for exporters than for non-exporters. The richness of our data allows us to examine alternative explanations for the results we present. We conclude by discussing the strategic implications of our findings for firms.Liquidity constraint; exporter; non-exporter

The Internationalization of Small and Medium-Sized Enterprises: A Policy Perspective

Small and medium sized firms play an important role in the process of creative destruction. The focus of the paper is on the international diffusion of small and medium sized firms innovations. Small and medium sized firms face two challenges in globalization: property rights protection and barriers to entry. We suggest that these barriers can frequently be circumvented by using existing multinationals as international conduits for small and medium size firms' innovations. However, such intermediated modes of expansion is adversely affected by transaction difficulties and intermediator's rent extraction. We raise two categories of questions: (i) is the private sector systematically making the wrong choice between the direct and intermediated mode of international expansion? and (ii) What should be the policy guidelines to improve the overall rate of international diffusion of innovation by small and medium sized enterprises.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/43666/1/11187_2004_Article_119506.pd

Changing perspectives on the internationalization of R&D and innovation by multinational enterprises: a review of the literature

Internationalization of R&D and innovation by Multinational Enterprises (MNEs) has undergone a gradual and comprehensive change in perspective over the past 50 years. From sporadic works in the late 1950s and in the 1960s, it became a systematically analysed topic in the 1970s, starting with pioneering reports and “foundation texts”. Our review unfolds the theoretical and empirical evolution of the literature from dyadic interpretations of centralization versus decentralization of R&D by MNEs to more comprehensive frameworks, wherein established MNEs from Advanced Economies still play a pivotal role, but new players and places also emerge in the global generation and diffusion of knowledge. Hence views of R&D internationalization increasingly rely on concepts, ideas and methods from IB and other related disciplines such as industrial organization, international economics and economic geography. Two main findings are highlighted. First, scholarly research pays an increasing attention to the network-like characteristics of international R&D activities. Second, different streams of literature have emphasized the role of location- specific factors in R&D internationalization. The increasing emphasis on these aspects has created new research opportunities in some key areas, including inter alia: cross-border knowledge sourcing strategies, changes in the geography of R&D and innovation, and the international fragmentation of production and R&D activities

Accounting for Endogeneity When Assessing Strategy Performance: Does Entry Mode Choice Affect FDI Survival?

Firms choose strategies based on their attributes and industry conditions; therefore, strategy choice is endogenous and self-selected. Empirical models that do not account for this and regress performance measures on strategy choice variables are potentially misspecified and their conclusions incorrect. I highlight how self-selection on hard-to-measure or unobservable characteristics can bias strategy performance estimates and recommend an econometric technique that has been developed to account for this effect. Although this concern applies to a wide range of strategy questions, to demonstrate its effect I empirically examine if entry mode choice (acquisition versus greenfield) influences foreign direct investment survival. In specifications that do not account for self-selection, I find that greenfield entries have survival advantages compared to acquisitions. This confirms previous findings. However, the significance of this effect disappears once I account for self-selection of entry mode in the empirical estimates. The results confirm that estimates from models that do not account for self-selection of strategy choice can lead to incorrect or misleading conclusions.Endogenous Strategy Choice, Foreign Direct Investment, Survival, Entry Mode

Do Foreign-Owned and U.S.-Owned Establishments Exhibit the Same Location Pattern in U.S. Manufacturing Industries?

There are arguments to support and contradict the proposition that foreign-owned and U.S.-owned establishments exhibit similar location patterns within the United States. This paper addresses these conflicting views by comparing the location of all manufacturing establishments in the United States held by the U.S. and by foreign firms. The empirical evidence indicates that the location patterns of foreign-owned and U.S.-owned establishments differ. Moreover, the most influential factor in explaining the location pattern difference is that foreign-owned establishments, compared to U.S.-owned establishments, favor coastal states. I also find evidence to suggest that foreign firms favor states with low unionization rates, low wage rates, and right to work legislation. These results are consistent with arguments that foreign establishments differ from their domestic counterparts and value location attributes differently.© 1998 JIBS. Journal of International Business Studies (1998) 29, 469–492