UNIVERSITY OF STRATHCLYDE Strathclyde International Business Unit Working Paper 2002/02 Explaining the Export Intensity o f Multinational Subsidiaries: an EU-based Empirical Study

This paper provides explanations for the export patterns of multinational (MNE) manufacturing subsidiaries. Drawing on the results of a large-scale mail survey undertaken in four EU countries (Ireland, Portugal, Spain and the UK), the paper tests formally the determinants of export intensity. This is an under-researched area, despite the well understood complementarities between foreign direct investment (FDI) and exporting in the strategies of MNEs and their subsidiaries. The paper makes a specific contribution to the promising, yet underdeveloped, research on the relationship between subsidiary strategies and their trade patterns. A key finding is that host country characteristics impact on export intensity. Quite plausibly, subsidiaries located in smaller markets tend to be considerably more export-oriented than those located in larger EU economies. Export intensity is also positively related to a number of subsidiary characteristics, namely, greenfield mode of entry, subsidiary size, and to the Rationalised Manufacturer and Product Mandate subsidiary types; and negatively related to age of subsidiary, specialised capabilities in product development and strategic decision-making autonomy. Descriptive statistics revealed that high exportintensive affiliates have high levels of intra-group trade and import a high proportion of their imports. The results have important policy implications, casting doubts on conventional measures for promoting exports, and suggesting instead policy measures to support creative and innovative subsidiaries and to improve their embeddedness. Contact author: Professor Stephen Young Department of Marketing University of Strathclyde Stenhouse Building 173 Cathedral Street Glasgow G4 0RQ Email: [email protected] Phone: ++ 44 (0)141 548 3146 Fax: ++ 44 (0)141 552 2802 *CEMPRE – Centro de Estudos Macroeconómicos e Previsão – is supported by the Fundação para a Ciência e a Tecnologia, Portugal, through the Programa Operacional Ciência, Tecnologia e Inovação (POCTI) of the Quadro Comunitário de Apoio III, which is financed by FEDER and Portuguese Funds. Ana Teresa Tavares would like to acknowledge the support of the Fundação para a Ciência e a Tecnologia, Portugal.