Business, Society and Politics by Ulf Elg

Author:Ulf Elg
Language: eng
Format: epub
Publisher: Emerald Group Publishing Limited
Published: 2012-04-10T04:00:00+00:00

a Firm size is in millions of dollars. Significant correlations are in italics.

The estimation results for the selection process capturing the decision to internationalize are shown in Table 8.2. Model 1 contains only main effects. The signs of some of the significant coefficients are as expected. Firm size and operational profitability are more associated with internationalization. On the other hand, younger firms are more prone to go abroad. As for the political variables, firms with connected boards seem to be more inclined to decide for internationalization. In this model, the coefficient for financial contributions is positive but non-significant. However, we should look to Models 2 and 3 with the interaction terms. These interactions are important to isolate possible confounding effects. In Model 2 the basic results for the control variables do not change, but now the coefficient for financial contribution is highly significant and positive. This is so because these two types of political connections seem to be substitutes for one another. Firms with connected boards do not seem to need to give money to politicians. This is an interesting result that merits further exploration. The Model 3 is more complete as we add the interaction of financial contributions and board participation with the firm age. This model shows that for an average aged firm, with no board participation, making contributions to the last election has a strong effect on the decision to internationalize. Further, younger firms seem to profit more from this effect than older firms. This is akin to the idea of national champions, according to which, the government give incentives to some firms to grow fast, concentrate in their domestic markets, in order to be competitive abroad.

Table 8.2: Probit regression results for the decision to internationalizea.

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