European Firms and International Markets

New developments in the world economy have increased the competitive pressures on European firms in international as well as in domestic markets. The divide between winners and losers from globalisation does not run anymore only between sectors. Increasingly both winners and losers can be found also within sectors. With a growing recognition for the need to analyse these issues in a cross-country perspective, under the coordination of Bruegel and CEPR (Centre for Economic Policy Research), six research centers from six EU countries agreed in 2006 to create a network working on policy relevant questions that are best treated using firm-level trade and FDI data. The network was named after its central research theme: European Firms and International Markets.

European Firms and International Markets is a two-year initiative, which could be extended to a longer period. In each year, a workshop and a conference will be held and result in the production of a joint Bruegel-CEPR policy report. The first workshop was held in Brussels on 13 March 2007 and the first conference took place in Brussels on 19 June 2007. The first year’s report will consist in a set of comparative statistics presenting the main cross-country stylised facts on the internationalisation of European firms. The preliminary draft will be presented at the June conference and officially released in October 2007. On the basis of results obtained in the first year, a specific policy issue will be selected for the second year.

Publication: The Happy Few: The internationalisation of European firms. New facts based on firm-level evidence. (By Therry Mayer & Gianmarco I.P. Ottaviano, Bruegel Blueprint Series, #3).

IAW: Standard models of multinational firms assume that firms are symmetric and that financing the costs of entering foreign markets is costless. Yet, recent literature stresses the importance of firm heterogeneity with regard to productivity. The assumption that firms have unrestricted access to external finance might be an unjustified simplification as well. In this project, we use a detailed firm-level dataset of German firms to provide evidence on the interaction of differences in productivity across firms, costs of market entry, and the patterns of internationalization of firms.

• Project Partners: Gianmarco Ottaviano for Bruegel and Thierry Mayer for CEPR are in charge of coordination. The founding partners were CEPII (France), Hungarian Academy of Sciences (Hungary), Milan University of Studies (Italy), GEP at the University of Nottingham (UK), Stockholm University (Sweden) and IAW Tübingen (Germany). The National Bank of Belgium (Belgium) and the University of Oslo (Norway) are currently joining.
• Contact Person (IAW): Prof. Dr. Claudia M. Buch, email