Availability of Business Services and Outward Investment: Evidence from French Firms

摘要

This paper considers the link between the local availability of services in a home country and a firm's decision to become a multinational. This is a highly topical issue, given that many industrialized countries are increasingly becoming service economies and firms become increasingly more globalized. In an analysis of rich firm level data for France we find evidence that the availability of services in the home country indeed has a positive impact on firms' decisions to become multinationals. This is robust to endogeneity concerns. The result can be interpreted in a simple set-up where the local availability of business services improves firm efficiency and, hence, allows firms to overcome sunk costs of investing abroad more easily.