Local Externalities and Firm Internationalisation

The aim of the work is to understand how the role of local externalities (agglomeration economies and related variety), as well as firm heterogeneity, have influenced the internationalisation strategies chosen by Italian manufacturing firms from 1998 to 2006. Based on the 10th survey of the corporate bank Unicredit-Capitalia, I construct an unbalanced panel data of 19,635 firms. As in Cainelli, Ganau and Iacobucci, I compute related variety as a measure of the input-output relationships between firms of different sectors: this procedure allows taking into account the vertical related variety as a proxy for diversification. The results of the econometric analysis, conducted with multinomial logistic regressions, show that vertically related variety and productivity positively influence both export and FDI strategies. The extant literature on firm heterogeneity has been confirmed, while important findings on local externalities enrich the already existing theories.