Dr. Christian Reiner, Senior Researcher at LBS, gave a presentation on the internationalization of firms at a seminar for Austrian teachers at secondary schools on 12.October 2018. The seminar was organized by the Institut für Österreichkunde and the Österreichische Geographische Gesellschaft.
Firms with international activities, i.e. exports and/or foreign direct investment, are quite distinct from firms with no international orientation. In addition, exports are heavily concentrated; a small share of exporters account for a large share of exports. Generally, international firms are larger, more productive, more innovative and more capital intensive than firms operating only within the domestic market. Based on the “new new trade theory”, it is hypothesised that international firms are already more productive before they start their internationalization process. This advantage is necessary to overcome the fixed costs associated with international activities and the “liability of being foreign”. The latter refers to the fact that foreign firms find it harder to set up and expand their business operation compared to domestic firms because they do not have the same level of knowledge and social capital. Only a small share of firms is able to develop the capabilities to achieve international competitiveness: More than 90% of Austrian firms are not active in international markets and 2% of all exporting firms are responsible for more than half of all the Austrian exports.
Internationalized firms pay higher wages, but contribute to widening income disparities at the same time. For instance, manager salaries increase as a result of internationalization more than the wages of non-managers. This result holds true for exporting firms and firms with foreign direct investments, i.e. multinational enterprises, alike.
Mayer, T. et al. (2018): The happy few: The internationalisation of European firms. In: Intereconomics, May/June, 135-148.
Dr. Christian Reiner, Senior Researcher at LBS