2. Topic: Firm Heterogeneity, Exporting
and FDI
Group Members:
1- Umar Farooq Ali
2- Bilal Ahmed Hashmi
3- Tayyab Ali Baig
3. “If two persons share 100$ each, they will only
have 100$ with both of them. But if two
persons share one good thought, they both
will have two good thoughts each “
4. Executive Summary
• Importance of international trade.
• Productivity uncertainty.
• Firm ‘s Entry/exit.
• Relations between productivity, exporting and FDI
• Future predictions.
5. Introduction
• Aim of research
To understand the 2 dimensions
1. Cross-border trade
2. Cross-border investment
• Problem statement
“ How changes to the cost of exporting or foreign direct investment(FDI)
changes production patterns within industries and across countries”.
• Rationale of research
The underlying concept behind this study was to see how productivity of a
firm decides whether to export or not. A combination of sunk cost and
heterogeneity is the underlying characteristics.
• Types of research: qualitative or quantitative
This research is basically qualitative because of being constructive, naturalistic
and interpretive.
6. Literature review
• Main theme regarding variables
This article is divided in 5 sections having variables which shows different
relations.
In section 2, the relation between productivity (DV) and exchange rate,
agglomeration and changed policy environment (IV’s) are discussed.
In section 3, the relation between productivity (DV) and exporting and
establishing production facilities overseas (IV’s) are discussed.
• Theory building of variable
This theory was triggered by empirical observation of Bernard and Jensen
(1995). Later on Melitz (2003), helpman (2004) provided different ways to
think upon firm heterogeneity and participation in international markets.
8. Methodology
In this article, the methodology used is the same as in the past
conducted researches and studies based on which this theory
is generated. Some of the tests used to find the desired
results are listed as follows.
• KS test of stochastic dominance.
• OLS.
• Matched D-I-D.
These methodologies by different researchers with different
samples were used around the globe in different time periods
of 20th century.
11. Conclusion
• Firms who exports are more productive.
• Both firms (exporters and non-exporters) co-exist in the same
environment.
• Direct linkage between production and exporting.
• FDI also plays role in the increase productivity on the principle
of cross-border investment.
