International Engagement and Performance of New Zealand Firms
This thesis examines the determinants and consequences of international engagement by New Zealand firms, with a particular focus on the relationship between international activities and firm performance. The thesis is based around two central questions: 1. How do characteristics of the firm and the economic environment influence the ability and incentives of New Zealand firms to become internationally engaged? 2. What effect does international engagement have on firm performance? In order to examine the causal relationships between firm performance and international activities, four analyses are conducted using longitudinal firm-level data from the prototype Longitudinal Business Database. This database provides detailed information on the performance and behaviour of New Zealand firms from a wide range of administrative and survey data sources. The four empirical chapters of the thesis investigate the relationships amongst firm performance, merchandise exporting and inward foreign direct investment. In Chapters 3 and 4, firm-level comparisons identify the types of firms that export and the factors driving those firms to expand into additional export markets and relationships. A range of determinants are considered including firm characteristics, destination market characteristics and localised spillovers. Having identified and controlled for the key firm-level factors which predict export market entry, subsequent performance outcomes are considered in Chapter 4. Chapter 5 examines the impact of new port infrastructure on the export behaviour and performance of local firms, while Chapter 6 turns attention to inward foreign direct investment, examining the pre-acquisition characteristics of foreign acquisition targets and their post-acquisition performance outcomes. The analysis in Chapters 3 and 4 suggests that firm characteristics both influence, and are influenced by, initial entry into exporting and subsequent expansion into new export relationships. While self-selection into exporting by high performing firms explains much of the performance differential between exporters and non-exporters in New Zealand, entry into exporting and subsequent expansion into new markets lead to increases in scale and capital intensity, with attendant effects on both firm-level and aggregate labour productivity. In turn, the choices that firms make regarding expansion into new export relationships are characterised by substantial path dependence. Firms tend to expand their export horizons sequentially, building on their existing experience and networks. Moreover, there is evidence of path dependence across firms, with entry into new export relationships reflecting demonstration effects from the export activities of other firms in the local area. Analysis of the uptake of new port infrastructure in Auckland in Chapter 5 suggests that the main determinants of uptake are product- and firm-related, rather than location specific. Firms use the new inland port in conjunction with the existing port in order to mitigate capacity constraints and/or access a greater range of transport options. However, there is no evidence that uptake of the new infrastructure is associated with improved export performance. Finally, the analysis in Chapter 6 suggests that foreign acquisition targets tend to be positively selected. Unlike export market entry, there is no strong evidence for firm-level performance improvements following from foreign acquisition. However, there is suggestive evidence that outcomes of foreign acquisition may differ according to the initial characteristics of the acquired firm, with initially weak performers being more likely to experience positive effects from acquisition.
exports, productivity, firm performance, inward FDI
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