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ODI from BRIC Countries: A Conceptual Framework

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Abstract

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.

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Notes

  1. 1.

    For a survey, see Lopez (2005), Wagner (2007, 2012, 2016), Greenaway and Kneller (2007), Singh (2010), Hayakawa et al. (2012).

  2. 2.

    We focus on Melitz (2003) because of its theoretical influence and empirical success. However, it is not the only model pointing to a causal link between export and productivity . Alternative approaches to modeling firm heterogeneity and trade are Yeaple (2005), Bernard et al. (2003), Jean (2002) and Bustos (2011).

  3. 3.

    For a survey, see Redding (2011).

  4. 4.

    Countries matter also in Bernard et al. (2010). They develop a general equilibrium model of multi-product and multi-destination firms in which heterogeneity is measured in terms of productivity and consumer taste. A key result of this model is that firms with the highest productivity start exporting, and products with the highest attributes are exported to the largest number of foreign markets ; on the contrary, products characterized by the worst attributes are sold only domestically.

  5. 5.

    See, for instance, Alvarez and Lopez (2005) for Chile, Van Biesebroeck (2005) for sub-Saharan Africa, Fafchamps et al. (2008) for Morocco, Yasar and Rejesus (2005) for Turkey, Djankov and Hoekman (2000) for Czech Republic, Fernandes (2007) for Colombia, Blalock and Gertler (2004) for Indonesia, Park et al. (2010) for China , and Haidar (2012) for India.

  6. 6.

    Consistent with the framework delineated above, we focus on contributions addressing the internationalization-performance nexus from an International Economics perspective. This is to say that all contributions reviewed below draw theoretical insights from Melitz (2003), Head and Ries (2003), Helpman et al. (2004), and Clerides et al. (1998) and set their empirical analysis in a microeconomic framework à la Bernard and Jensen (1995). For a survey on the internationalization-performance nexus from an International Business perspective, see Li (2007).

  7. 7.

    Consistent with these results, even though based on a different conceptual framework, are those of Edamura et al. (2014) and Cozza et al. (2015).

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Authors and Affiliations

  1. University of Milano-Bicocca, Milan, Italy

    Valeria Gattai & Piergiovanna Natale

  2. Catholic University of the Sacred Heart, Milan, Italy

    Rajssa Mechelli

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  1. Valeria Gattai
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Gattai, V., Mechelli, R., Natale, P. (2019). ODI from BRIC Countries: A Conceptual Framework. In: ODI from BRIC Countries. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-319-97340-1_3

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