Exports, Foreign Direct Investments and Productivity:Are Services Firms Different?

This paper contributes to the literature on international firm activities and firm performance byproviding the first evidence on the link of productivity and both exports and foreign directinvestment (fdi) in services firms from a highly developed country. It uses unique new datafrom Germany - one of the leading actors on the world market for services - that mergeinformation from regular surveys and from a one-time special purpose survey performed bythe Statistical Offices. Descriptive statistics, parametric and non-parametric statistical testsand regression analyses (with and without explicitly taking differences along the conditionalproductivity distribution and firms with extreme values, or outliers, into account) indicate thatthe productivity pecking order found in numerous studies using data for firms frommanufacturing industries – where the firms with the highest productivity engage in fdi whilethe least productive firms serve the home market only and the productivity of exporting firmsis in between – does not exist among firms from services industries. In line with thetheoretical model and the empirical results for software firms from India provided byBhattacharya, Patnaik and Shah (2010) there is evidence that firms with fdi are lessproductive than firms that export....