Foreign Expansion by Italian Manufacturing Firms in the Nineties: an Ordered Probit Analysis

This paper develops an index of internationalisation or foreign expansion index (FEI) of the firm. The FEI integrates various dimensions of internationalisation that, although interrelated, have usually been analyzed independently, e.g., exports and FDI. Because of its prominent interfirm relationships and North-South discrepancies, this study focuses on Italy, constructing FEIs for each of some 4000 firms for three periods characterized by very different exchange rate regimes. The determinants of FEI in each period are studied at both the macro and micro levels, the latter through the use of an ordered probit model. The findings suggest that: a) firm size, inter-firm relations, innovation capabilities, exchange rates, location and technology were all highly significant determinants of FEI; and b) although still low and especially so in the South, the FEIs have risen somewhat in the 1990s, especially in the Center and South.