The global operations of European firms

This report uses newly collected, comparable cross country data from 15,000 firms in Austria, France, Germany, Hungary, Italy, Spain and the United Kingdom with detailed information on international activities. In line with a large literature, we find that size, productivity, the skill intensity of the workforce and the ability to innovate are positively related to firms' export performance in all countries. The same firm characteristics support more complex internationalization strategies, such as exporting to a larger number of markets, to more distant countries and producing abroad through FDI or international outsourcing. Moreover, these features influence the patterns of internationalization in a remarkably similar way across countries. Consequently, national differences in export performance are mostly related to differences in the industrial structure: for example, if Italy and Spain had the same size-sector firm distribution as Germany, their aggregate export would increase by around 30%. In addition, firms pursuing a more comprehensive international strategy seem to have resisted the crisis better. We conclude that structural policies that contribute to firm growth, productivity, accumulation of human capital and innovation are the best way to strengthen the international projection of European firms. Although more difficult to implement, their effects are going to be larger and more long lasting than those of policies directly targeting international activities.