Foreign Ownership and the Extensive Margins of Exports: Evidence for Manufacturing Enterprises in Germany

Abstract

We examine how foreign ownership of a firm affects the variety of goods that the firm exports and the number of countries it trades with. We construct a simple theoretical model of how foreign ownership may affect these extensive margins of exports and take this model to data from Germany, one of the leading actors on the world market for goods. In line with theoretical predictions we find that foreign‐owned firms do export more goods to more countries after controlling for firm size, productivity and industry affiliation. These differences between foreign‐owned firms and domestically controlled firms are highly statistically significant, and they are large from an economic point of view, with foreign‐owned firms exporting up to 39 per cent more goods to up to 31 per cent more countries.

Foreign ownership and the export and import propensities of developing‐country firms

“…To set the stage for our empirical analysis, consider a simple theoretical framework with heterogeneous firms, based on Chaney () and Raff and Wagner (). The model allows us to identify how foreign ownership interacts with the more standard firm‐level determinants of foreign market participation, in this case the firm's productivity.…”

“…But most studies have been concerned with direct effects on firm productivity or indirect effects, that is spillovers, on locally owned firms (see Görg & Greenaway, 2004 for a survey, and especially Girma, Gong, Görg, & Lancheros, 2015 for a recent, state-of-the-art contribution and a discussion of this strand of the literature). Only few papers have looked at the effect of foreign ownership on the trade performance of firms and these have tended to focus on developed countries (see, for instance, Raff & Wagner, 2014 on the effect of foreign ownership on the extensive margins of exports of German manufacturing firms). An important exception is Wang and Wang (2015) who study the effect of foreign ownership on the export share and other performance measures of Chinese firms.…”

R&D Activities and Extensive Margins of Exports in Manufacturing Enterprises: First Evidence for Germany

“…Foreign ownership is known to have a positive impact on the margins of exports, because these firms can use the international networks and trade contacts of their parent companies and are involved in international supply chains (see Raff and Wagner (2014) for a discussion of the literature, a theoretical model, and empirical evidence for Germany). A firm is considered to be foreign owned if more than 50 percent of the voting rights of the owners or more than 50 percent of the shares are controlled (directly or indirectly) by a firm or a person/institution located outside Germany.…”

Still Different After All These Years Extensive and Intensive Margins of Exports in East and West German Manufacturing Enterprises

“…Foreign ownership is known to have a positive impact on the margins of exports, because 9 these firms can use the international networks and trade contacts of their parent companies and are involved in international supply chains (see Raff and Wagner (2014) for a discussion of the literature, a theoretical model, and empirical evidence for Germany). A firm is considered to be foreign owned if more than 50 percent of the voting rights of the owners or more than 50 percent of the shares are controlled (directly or indirectly) by a firm or a person/institution located outside Germany.…”