Multi-Product Firms and Exporting: A Developing Country Perspective

In this paper, we shed additional light on the complex relationship between multinational enterprises (MNEs), exporting and economic development by making a distinction between single and multi-product firms. As far as we are aware, the export behavior of foreign firms in a multi-product setting has not previously been considered for a developing country. Using firm-level data for Thailand we show that the number of goods produced causes a much larger variation in exports volumes than in total production. Whilst the number of products exported and the total volume exported is positively correlated we find, in contrast to US studies, a surprising negative correlation between the number of products produced and the volume of production. We then go on to investigate for the first time the characteristics of multi-product firms and the number of products they produce and find the distinction between foreign owned and domestic firms as well as between foreign exporters and foreign non-exporters is important. The presence of foreign firms producing single products solely for the domestic market as well as those producing many products for export demonstrates the diversity of behavior of foreign firms in developing countries and emphasises that a foreign presence may not be as beneficial as policy makers are led to believe.Multinationals, Firm characteristics, Multi-product, Exports

Firm Heterogeneity and Export Participation: A New Asian Tiger Perspective

This paper investigates the relationship between firm heterogeneity and a firm’s decision to export, using the annual survey of Thai manufacturing firms from 2001 to 2004. A significant contribution of this paper is that we are, for the first time, able to break down FDI by country of origin to observe whether the behavior of MNEs differs by region of origin. We find that entry sunk costs and firm characteristics are important factors in explaining a firm’s decision to export. Another important determinant is the ownership structure of the firm, with foreign owned firms having a higher probability of exporting than domestically owned firms although this differs across country of ownership with potentially important policy implications. Export platform FDI is used to explain the behavior of foreign firms that invest in Thailand. Using three measures of total factor productivity, we also find that highly productive firms self-select into the export market. The implication for governments of developing countries is the need to think carefully about how and to whom they target their inward FDI policies as a means of growth. The heterogeneous behavior of multinationals from different nations means that policies targeting specific regions or countries may be preferable to general tax concessions or the implementation of special economic zones that are open to all.FDI, exports, firm heterogeneity, development

Exporting, foreign direct investment and firm heterogeneity in Thailand

This thesis presents an empirical investigation of the relationship between exporting, foreign direct investment (FDI) and firm heterogeneity in Thailand using a firm-level data from the Annual Survey of Thailand’s manufacturing industry between 2001 and 2004. We first examine the factors affecting the export participation decision of a firm by emphasising the importance of sunk entry costs, structure of ownership and other firm-specific characteristics. If a firm has export experience, the probability of exporting is likely to increase in the current period. Other firm-specific characteristics such as ownership, productivity, firm size, training and establishment location also significantly determine the probability of exporting. Second, we consider the role of the financial factors and the export participation decision. The internal finance of a firm as a measure of financial health is used to explain the capability to invest in order to enter export markets. The liquidity ratio has a positive and significant effect on the probability of exporting whilst the leverage ratio has the opposite effect. Third, we make a distinction between single- and multi-product firms and examine the characteristics associated with a multi-product firm. Being a multi-product firm and the number of products produced are associated with various firm-specific characteristics such as productivity, firm size and research and development (R&D). Finally, we emphasise on an indirect impact of FDI inflows in the host economy by investigating spillover effects from foreign to domestic firms. The positive and significant results for horizontal productivity spillovers and vertical export spillovers confirm that foreign firms do generate some positive externalities to domestically-owned firms

Multi-product firms and exporting: a developing country perspective

In this paper we make the distinction between single-product and multi-product firms to contribute to our understanding of the complex relationship between multinational enterprises (MNEs), exporting and economic development. Using firm-level data for Thailand we show that the number of goods produced causes a larger variation in exports volumes than production volumes. Whilst the number of products and the total volume of exports are positively correlated we find, in contrast to US studies, a negative correlation between the number of products produced and the volume of production per product. We then investigate the characteristics associated with multi-product firms and find a distinction between foreign-owned and domestic firms. The presence of foreign firms producing single products solely for the domestic market as well as those producing many products for export demonstrates the diversity of behaviour of foreign-owned firms in developing countries

Firm Heterogeneity, Origin of Ownership and Export Participation

This paper investigates the relationship between firm heterogeneity and a firm's decision to export, using the annual survey of Thai manufacturing firms from 2001 to 2004. A significant contribution of this paper is that we are, for the first time, able to break down FDI by country of origin to observe whether the behavior of MNEs differs by region of origin. We find that entry sunk costs and firm characteristics are important factors in explaining a firm's decision to export. Another important determinant is the ownership structure of the firm, with foreign owned firms having a higher probability of exporting than domestically owned firms although this differs across country of ownership with potentially important policy implications. Export platform FDI is used to explain the behavior of foreign firms that invest in Thailand. Using three measures of total factor productivity, we also find that highly productive firms self-select into the export market. The implication for governments of developing countries is the need to think carefully about how and to whom they target their inward FDI policies as a means of growth. The heterogeneous behavior of multinationals from different nations means that policies targeting specific regions or countries may be preferable to general tax concessions or the implementation of special economic zones that are open to all.FDI, exports, firm heterogeneity, development