ODI from BRIC Countries: A Conceptual Framework

  • Valeria Gattai
  • Rajssa Mechelli
  • Piergiovanna Natale


In this chapter, we review the literature on the internationalization-performance nexus according to the International Economics perspective. The seminal contribution of Bernard and Jensen (1995) drew researchers’ attention to the relationship between exposure to international markets and firm performance. Regardless of the year and the country of analysis, internationalized firms turn out to be “the happy few”, that is, they are the minority, but they outperform domestic enterprises. With the aim of providing a conceptual framework to Outward Direct Investment (ODI) from Brazil, Russia, India, and China (BRIC), we consider the theoretical contributions on self-selection and learning-by-internationalization, and we present the related empirical evidence. Theoretical models and econometric analyses are described in a non-technical manner, without scarifying exhaustiveness for simplicity. Particular emphasis is laid on comparing the previous contributions and identifying the main gaps in the ODI literature. This is key to introducing the novelties of our approach, which are stressed throughout the chapter. References to the International Business literature on ODI and firm-level performance are provided, for sake of completeness. Reading this chapter is essential to frame our empirical exercise because it lays down the theoretical foundations of the regression analysis developed elsewhere in the book.


Firm performance Heterogeneous firms FDI literature ODI literature Self-selection Learning-by-internationalization 


  1. Alvarez, R., & Lopez, R. A. (2005). Exporting and Performance: Evidence from Chilean Plants. Canadian Journal of Economics, 38, 1384–1400.CrossRefGoogle Scholar
  2. Antras, P. (2016). Global Production: Firms, Contracts, and Trade Structure, CREI Lectures in Macroeconomics Series. Princeton: University Press, Princeton and Oxford.CrossRefGoogle Scholar
  3. Antras, P., & Helpman, E. (2004). Global Sourcing. Journal of Political Economy, 112, 552–580.CrossRefGoogle Scholar
  4. Antras, P., & Helpman, E. (2008). Contractual Frictions and Global Sourcing. In E. Helpman, D. Marin, & T. Verdier (Eds.), The Organization of Firms in a Global Economy (pp. 9–54). Cambridge: Harvard University Press.Google Scholar
  5. Aw, B. J., & Lee, Y. (2008). Firm Heterogeneity and Location Choice for Taiwanese Multinationals. Journal of International Economics, 75, 67–179.CrossRefGoogle Scholar
  6. Baldwin, J., & Gu, W. (2009). The Impact of Trade on Plant Scale, Production-Run Length and Diversification. In T. Dunne, J. B. Jensen, & M. J. Roberts (Eds.), Producer Dynamics: New Evidence from Micro Data (pp. 557–592). Chicago: University of Chicago Press.CrossRefGoogle Scholar
  7. Barba Navaretti, G., Bugamelli, M., Schivardi, F., et al. (2011). The Global Operations of European Firms. Second EFIFE Policy Report, Bruegel 12.Google Scholar
  8. Barba Navaretti, G., & Castellani, D. (2008). Do Italian Firms Improve Their Performance at Home by Investing Abroad? In S. Brakman & H. Garretsen (Eds.), Foreign Direct Investment and the Multinational Enterprise. Cambridge, MA: MIT Press.Google Scholar
  9. Barba Navaretti, G., Castellani, D., & Disdier, A. C. (2010). How Does Investing in Cheap Labour Countries Affect Performance at Home? Firm-Level Evidence from France and Italy. Oxford Economic Papers, 62, 234–260.CrossRefGoogle Scholar
  10. Basile, R., Giunta, A., & Nugent, J. B. (2003). Foreign Expansion by Italian Manufacturing Firms in the Nineties: An Ordered Probit Analysis. Review of Industrial Organization, 23, 1–24.CrossRefGoogle Scholar
  11. Békés, G., & Muraközy, B. (2018). The Ladder of Internationalization Modes: Evidence from European Firms. Review of World Economics.
  12. Benfratello, L., & Razzolini, T. (2009). Firms’ Productivity and Internationalisation Choices: Evidence from a Large Sample of Italian Firms. In L. Piscitello & G. Santangelo (Eds.), Multinationals and Local Competitiveness (pp. 15–39). Milano: Franco Angeli.Google Scholar
  13. Bernard, A. B., Eaton, J., Jensen, J. B., et al. (2003). Plants and Productivity in International Trade. American Economic Review, 93, 1268–1290.CrossRefGoogle Scholar
  14. Bernard, A. B., & Jensen, J. B. (1995). Exporters, Jobs and Wages in US Manufacturing: 1976–1987. Brookings Papers on Economic Activity, Microeconomics, 1995, 67–119.CrossRefGoogle Scholar
  15. Bernard, A. B., Redding, S., & Schott, P. (2007). Comparative Advantage and Heterogeneous Firms. Review of Economic Studies, 74, 31–66.CrossRefGoogle Scholar
  16. Bernard, A. B., Redding, S., & Schott, P. (2010). Multi-Product Firms and Product Switching. American Economic Review, 100, 70–97.CrossRefGoogle Scholar
  17. Blalock, G., & Gertler, P. J. (2004). Learning from Exporting Revisited in a Less Developed Setting. Journal of Development Economics, 75, 397–416.CrossRefGoogle Scholar
  18. Borin, A., & Mancini, M. (2016). Foreign Direct Investment and Firm Performance: An Empirical Analysis of Italian Firms. Review of World Economics, 152, 705–732.CrossRefGoogle Scholar
  19. Buckley, P. J., Clegg, L. J., Cross, A. R., et al. (2007). The Determinants of Chinese Outward Foreign Direct Investment. Journal of International Business Studies, 38, 499–518.CrossRefGoogle Scholar
  20. Bugamelli, M., Cipollone, P., & Infante, L. (2000). L’internazionalizzazione delle imprese italiane negli anni novanta. Rivista Italiana degli Economisti, 3, 349–386.Google Scholar
  21. Bugamelli, M., Cipollone, P., & Infante, L. (2001). Le imprese italiane all’estero: Una valutazione quantitativa per strategia di accesso. In B. Quintieri (Ed.), Le imprese esportatrici italiane: caratteristiche, performance e internazionalizzazione. Bologna: Il Mulino.Google Scholar
  22. Bustos, P. (2011). Trade Liberalization, Exports and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinean Firms. American Economic Review, 101, 304–340.CrossRefGoogle Scholar
  23. Casaburi, L., Gattai, V., & Minerva, G. A. (2007). Firms’ International Status and Heterogeneity in Performance: Evidence from Italy. Rivista di Politica Economica, 97, 151–187.Google Scholar
  24. Castellani, D. (2002). Firms’ Technological Trajectories and the Creation of Foreign Subsidiaries. International Review of Applied Economics, 16, 359–371.CrossRefGoogle Scholar
  25. Castellani, D., & Giovannetti, G. (2008). Imprese internazionalizzate e produttività: Il ruolo delle competenze organizzative e manageriali. L’Industria, 29, 385–403.Google Scholar
  26. Castellani, D., & Giovannetti, G. (2010). Productivity and the International Firm: Dissecting Heterogeneity. Journal of Economic Policy Reform, 13, 25–42.CrossRefGoogle Scholar
  27. Castellani, D., Mariotti, I., & Piscitello, L. (2008). The Impact of Outward Investments on Parent Company’s Employment and Skill Composition: Evidence from the Italian Case. Structural Change and Economic Dynamics, 19, 81–94.CrossRefGoogle Scholar
  28. Castellani, D., & Zanfei, A. (2007). Internationalisation, Innovation and Productivity: How Do Firms Differ in Italy? The World Economy, 30, 156–176.CrossRefGoogle Scholar
  29. Chen, W., & Moore, M. (2010). Location Decision of Heterogeneous Multinational Firms. Journal of International Economics, 80, 188–199.CrossRefGoogle Scholar
  30. Clerides, S. K., Lach, S., & Tybout, J. R. (1998). Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco. Quarterly Journal of Economics, 113, 903–947.CrossRefGoogle Scholar
  31. Cozza, C., Rabellotti, R., & Sanfilippo, M. (2015). The Impact of Outward FDI on the Performance of Chinese Multinationals. China Economic Review, 36, 42–57.CrossRefGoogle Scholar
  32. Dai, M., & Yu, M. (2013). Firm R&D, Absorptive Capacity and Learning by Exporting: Firm-Level Evidence from China. World Economy, 36, 1131–1145.CrossRefGoogle Scholar
  33. Damijan, J. P., Polanec, S., & Prasnikar, J. (2007). Outward FDI and Productivity: Micro-Evidence from Slovenia. World Economy, 30, 135–155.CrossRefGoogle Scholar
  34. De Loecker, J. (2007). Do Exports Generate Higher Productivity? Evidence from Slovenia. Journal of International Economics, 73, 69–98.CrossRefGoogle Scholar
  35. Demirbas, D., Patnaik, I., & Shah, A. (2013). Graduating to Globalisation: A Study of Southern Multinationals. Indian Growth and Development Review, 6, 242–259.CrossRefGoogle Scholar
  36. Djankov, S., & Hoekman, B. M. (2000). Foreign Investment and Productivity Growth in Czech Enterprises. World Bank Economic Review, 14, 49–64.CrossRefGoogle Scholar
  37. Du, J., Lu, Y., Tao, Z., & Yu, L. (2012). Do Domestic and Foreign Exporters Differ in Learning by Exporting? Evidence from China. China Economic Review, 23, 296–315.CrossRefGoogle Scholar
  38. Edamura, K., Haneda, S., Inui, T., et al. (2014). Impact of Chinese Cross-Border Outbound M&As on Firm Performance: Econometric Analysis Using Firm-Level Data. China Economic Review, 30, 169–179.CrossRefGoogle Scholar
  39. Fafchamps, M., Hamine, S. E., & Zeufack, A. (2008). Learning to Export: Evidence from Moroccan Manufacturing. Journal of African Economics, 17, 305–335.CrossRefGoogle Scholar
  40. Falvey, R., Greenaway, D., & Yu, Z. (2004). Efficiency Differentials and Intra-Industry Trade. Leverhulme Centre for Research on Globalisation and Economic Policy, University of Nottingham, GEP Research Paper 5.Google Scholar
  41. Federico, S. (2010). Outsourcing Versus Integration at Home or Abroad and Firm Heterogeneity. Empirica, 37, 47–63.CrossRefGoogle Scholar
  42. Fernandes, A. M. (2007). Trade Policy, Trade Volumes and Plant-Level Productivity in Colombian Manufacturing Industries. Journal of International Economics, 71, 52–71.CrossRefGoogle Scholar
  43. Gattai, V., Mechelli, R., & Natale, P. (2018). Some Twins Are Not Alike: FDI Premia in the Former Soviet States. International Journal of Emerging Markets, forthcoming.Google Scholar
  44. Gattai, V., & Trovato, V. (2016). Estimating Sourcing Premia Using Italian Regional Data. The B.E. Journal of Economic Analysis and Policy, 16, 1029–1067.CrossRefGoogle Scholar
  45. Giovannetti, G., Ricchiuti, G., & Velucchi, M. (2011). Size, Innovation and Internationalisation: A Survival Analysis of Italian Firms. Applied Economics, 43, 1511–1520.CrossRefGoogle Scholar
  46. Giovannetti, G., Ricchiuti, G., & Velucchi, M. (2013). Heterogeneity in Managerial Strategies and Internationalisation of Firms: The Case of Italy. Journal of Industrial and Business Economics, 40, 51–66.Google Scholar
  47. Greenaway, D., & Kneller, R. (2007). Firm Heterogeneity, Exporting and Foreign Direct Investment: A Survey. The Economic Journal, 117, F134–F161.CrossRefGoogle Scholar
  48. Grossman, S. J., Helpman, E., & Szeidl, A. (2006). Optimal Integration Strategies for the Multinational Firm. Journal of International Economics, 70, 216–238.CrossRefGoogle Scholar
  49. Haidar, J. (2012). Trade and Productivity: Self-Selection or Learning-by-Exporting in India. Economic Modelling, 29, 1766–1773.CrossRefGoogle Scholar
  50. Hayakawa, K., Kimura, F., & Machikita, T. (2012). Globalization and Productivity: A Survey of Firm-Level Analysis. Journal of Economic Surveys, 26, 332–350.CrossRefGoogle Scholar
  51. Head, K., & Ries, J. (2003). Heterogeneity and the Foreign Direct Investment Versus Exports Decision of Japanese Manufacturers. Journal of the Japanese and International Economics, 17, 448–467.CrossRefGoogle Scholar
  52. Helpman, E., Melitz, M., & Yeaple, S. (2004). Export Versus FDI. American Economic Review, 94, 300–316.CrossRefGoogle Scholar
  53. Hijzen, A., Inui, T., & Todo, Y. (2010). Does Offshoring Pay? Firm-Level Evidence from Japan. Economic Inquiry, 48, 880–895.CrossRefGoogle Scholar
  54. Hijzen, A., Jean, S., & Mayer, T. (2011). The Effects at Home of Initiating Production Abroad: Evidence from Matched French Firms. Review of World Economics, 147, 457–483.CrossRefGoogle Scholar
  55. Huang, Y., & Zhang, Y. (2017). How Does Outward Foreign Direct Investment Enhance Firm Productivity? A Heterogeneous Empirical Analysis from Chinese Manufacturing. China Economic Review, 44, 1–15.CrossRefGoogle Scholar
  56. Ito, Y. (2007). Choice for FDI and Post-FDI Productivity. RIETI Discussion Paper E049.Google Scholar
  57. Jean, S. (2002). International Trade and Firms’ Heterogeneity Under Monopolistic Competition. Open Economics Review, 13, 291–311.CrossRefGoogle Scholar
  58. Kimura, F., & Kiyota, K. (2006). Exports, FDI, and Productivity: Dynamic Evidence from Japanese Firms. Review of World Economics, 142, 695–719.CrossRefGoogle Scholar
  59. Kohler, W. K., & Smolka, M. (2011). Sourcing Premia with Incomplete Contracts: Theory and Evidence. The B.E. Journal of Economics Analysis and Policy, 11, 1–39.CrossRefGoogle Scholar
  60. Kohler, W. K., & Smolka, M. (2012). Global Sourcing Decisions and Firm Productivity: Evidence from Spain. In R. M. Stern (Ed.), Quantitative Analysis of Newly Evolving Patterns of International Trade: Fragmentation, Offshoring of Activities, and Vertical Intra-Industry Trade (pp. 139–189). Singapore: World Scientific Publishing.CrossRefGoogle Scholar
  61. Kraay, A. (1999). Exports and Economic Performance: Evidence from a Panel of Chinese Enterprises. Revue d’ Economie du Development, 1, 183–207.Google Scholar
  62. Li, C., & Yin, X. (2010). The “Productivity Paradox” of Chinese Export Firms: Review and Assessment. China Economist, 25, 74–82.Google Scholar
  63. Li, L. (2007). Multinationality and Performance: A Synthetic Review and Research Agenda. International Journal of Management Review, 9, 117–139.CrossRefGoogle Scholar
  64. Li, L., Liu, X., Yuan, D., et al. (2017). Does Outward FDI Generate Higher Productivity for Emerging Economy MNEs? – Micro-Level Evidence from Chinese Manufacturing Firms. International Business Review, 26, 839–854.CrossRefGoogle Scholar
  65. Lopez, R. A. (2005). Trade and Growth: Reconciling the Macroeconomic and Microeconomic Evidence. Journal of Economic Surveys, 19, 623–648.CrossRefGoogle Scholar
  66. Lu, D. (2012). Exceptional Exporter Performance? Evidence from Chinese Manufacturing Firms. Working Paper University of Rochester.Google Scholar
  67. Ma, Y., Tang, H., & Zhang, Y. (2014). Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters. Journal of International Economics, 92, 349–362.CrossRefGoogle Scholar
  68. Mallick, S., & Yang, Y. (2013). Productivity Performance of Export Market Entry and Exit: Evidence from Indian Firms. Review of International Economics, 21, 809–824.CrossRefGoogle Scholar
  69. Mayer, T., & Ottaviano, G. I. P. (2007). The Happy Few: The Internationalisation of European Firms, Bruegel Blueprint Series 3. Brussels: Bruegel.Google Scholar
  70. Melitz, M. J. (2003). The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica, 71, 1695–1725.CrossRefGoogle Scholar
  71. Melitz, M. J., & Ottaviano, G. I. P. (2008). Market Size, Trade and Productivity. Review of Economic Studies, 75, 295–316.CrossRefGoogle Scholar
  72. Murakami, Y. (2005). Are Multinational Enterprises More Productive? A Test of the Selection Hypothesis. Journal of Asian Economics, 16, 327–339.CrossRefGoogle Scholar
  73. Park, A., Yang, D., Shi, X., et al. (2010). Exporting and Firm Performance: Chinese Exporters and the Asian Financial Crisis. Review of Economics and Statistics, 92, 822–842.CrossRefGoogle Scholar
  74. Piva, M., & Vivarelli, M. (2001). The Skill Bias in Italy: A First Report. Economics Bulletin, 15, 1–8.Google Scholar
  75. Raff, H., Ryan, M., & Stahler, F. (2009). Whole vs. Shared Ownership of Foreign Affiliates. International Journal of Industrial Organization, 27, 572–581.CrossRefGoogle Scholar
  76. Redding, S. J. (2011). Theories of Heterogeneous Firms and Trade. Annual Review of Economics, 3, 77–105.CrossRefGoogle Scholar
  77. Singh, T. (2010). Does International Trade Cause Economic Growth? A Survey. The World Economy, 33, 1517–1564.CrossRefGoogle Scholar
  78. Tomiura, E. (2007). Global Sourcing, Technology, and Factor Intensity: Firm-Level Relationships. RIETI Discussion Paper Series 24.Google Scholar
  79. Van Biesebroeck, J. (2005). Exporting Raises Productivity in Sub-Saharan African Manufacturing Firms. Journal of International Economics, 67, 373–391.CrossRefGoogle Scholar
  80. Van Biesebroeck, J. (2014). Productivity, Exporting and Financial Constraints of Chinese SMEs. IDB Working Paper 506.Google Scholar
  81. Wagner, J. (2007). Exports and Productivity: A Survey of the Evidence from Firm-Level Data. The World Economy, 30, 60–72.CrossRefGoogle Scholar
  82. Wagner, J. (2012). International Trade and Firm Performance: A Survey of Empirical Studies Since 2006. Review of World Economics, 148, 235–267.CrossRefGoogle Scholar
  83. Wagner, J. (2016). A Survey of Empirical Studies Using Transaction Level Data on Exports and Imports. Review of World Economics, 152, 215–225.CrossRefGoogle Scholar
  84. Wang, H., Yang, J., & Lai, M. (2009). Export Behaviour and Firm Productivity in China. Journal of Chinese Economic and Business Studies, 7, 409–428.CrossRefGoogle Scholar
  85. Wernerfelt, B. (1984). A Resource-Based View of the Firm. Strategic Management Journal, 5, 171–180.CrossRefGoogle Scholar
  86. Yang, Y. (2008). The Impact of Exporting on Firm Performance: Evidence from Chinese Firms. London: Queen Mary University of London Mimeo.Google Scholar
  87. Yang, Y., & Mallick, S. (2010). Export Premium, Self-Selection and Learning-by-Exporting: Evidence from Chinese Matched Firms. The World Economy, 33, 1218–1240.CrossRefGoogle Scholar
  88. Yasar, M., & Rejesus, R. M. (2005). Exporting Status and Firm Performance: Evidence from a Matched Sample. Economics Letters, 88, 397–402.CrossRefGoogle Scholar
  89. Yeaple, S. R. (2005). A Simple Model of Firm Heterogeneity, International Trade, and Wages. Journal of International Economics, 65, 1–20.CrossRefGoogle Scholar
  90. Yeaple, S. R. (2009). Firm Heterogeneity and the Structure of U.S. Multinational Activity. Journal of International Economics, 78, 206–215.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Valeria Gattai
    • 1
  • Rajssa Mechelli
    • 2
  • Piergiovanna Natale
    • 1
  1. 1.University of Milano-BicoccaMilanItaly
  2. 2.Catholic University of the Sacred HeartMilanItaly

Personalised recommendations