Internationalization modes and productivity of Italian manufacturing: Some firm-level evidence

This paper compares the productivity ranking of alternative modes of internationalization for a panel of Italian manufacturing firms that are (i) purely domestic or internationally engaged in (ii) exports, (iii) foreign sourcing and (iv) foreign direct investment. By using consistent tests of stochastic dominance of first and second order, as well as by estimating productivity premia across firms for all strategies, we aim at investigating whether and to what extent these modes of firm's entry into the foreign markets conform to the predictions of both Helpman et al. (2004) and Antràs and Helpman (2004)'s seminal papers. While our data confirm the hierarchical theoretical ranking of the traditional moves, no evidence emerges that FDI firms dominate in productivity foreign sourcing firms. Obviously, our evidence also supports the prediction in the literature that domestic firms exhibit lower performances compared to their internationally involved counterparts.