Are Multinational Enterprises More Productive? A Test of the Selection Hypothesis

This paper investigates whether differences in productivity explain why some Japanese manufacturing firms sell only in the domestic market, while others serve foreign markets, either through exports, overseas production, outsourcing or licensing. Using firm level data, it is shown empirically that the productivity of multinational firms differs significantly from that of firms that sell only in the domestic market. It shows therefore that the heterogeneous productivity levels explain the channels of multinational enterprises.