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Export, FDI and Productivity - Evidence for French FirmsDirk EngelUniversity of Applied Sciences Stralsund; Rhine-Westphalia Institute for Economic Research (RWI-Essen) Vivien ProcherBergische University of Wuppertal June 1, 2009 Ruhr Economic Paper No. 111 Abstract: The decision of companies to enter international markets, either via exports or foreign direct investment (FDI), has been postulated by the self-sorting model of Helpman, Melitz and Yeaple (HMY, 2004). In the strict sense, the theoretical predictions of HMY only apply to firms that become engaged in marketdriven (horizontal) FDI. Hence, in this paper we apply more precise methodologies to test the HMY hypothesis. First, we classify MNEs according to the underlying motives for investing abroad (market-driven vs. resource-driven FDI). Second, we highlight the role of productivity growth in the post-entry period.Our findings suggest that productivity affects the FDI decision considerably whereas expected feedback and learning effects of FDI on productivity are remarkably lower.We further detect that more market-driven MNEs exhibit a higher productivity than comparatively less market-driven MNEs.
Number of Pages in PDF File: 39 Keywords: Foreign direct investment, horizontal and vertical FDI, multinational enterprises, productivity JEL Classification: F10, F23, D21, D24 working papers seriesDate posted: October 19, 2009Suggested CitationContact Information
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