Giorgia Giovannetti

Size, innovation and internationalization: a survival analysis of Italian firms

Firms’ survival is often seen as crucial for economic growth and competitiveness. This article focuses on business demography of Italian firms, using an original database, obtained by matching and merging to gain the intersection of three firm level datasets. This database allows us to simultaneously consider the effect of size, technology, trade, FDIs and innovation on firms’ survival probability. We show that size and technological level positively affect the likelihood of survival. Internationalized firms show higher failure risk: on average competition is stronger in international markets, forcing firms to be more efficient. However, large internationalized firms are more likely to ‘survive’. An Italian internationalized firm to be successful and to survive, should be high-tech, large and innovative.

Nominal debt as a burden on monetary policy

We study a dynamic equilibrium model where the same optimal monetary policy is implemented with and without full commitment if government debt is indexed. In contrast, with nominal debt, the full commitment policy is time inconsistent, since the government is tempted to inflate away its nominal liabilities. We characterize the optimal sequential policy. It has the feature that government debt is progressively depleted, and so, eventually, the time inconsistency problem vanishes. We compare this equilibrium to a myopic solution and to the Ramsey solution.

Productivity and the international firm: dissecting heterogeneity

Higher productivity of multinational firms and exporters has been widely documented in the literature, but the sources of this heterogeneity are still a black box. Using an original dataset on Italian firms, we show that higher total factor productivity of international firms can be to some extent explained by higher R&D intensity and managerial capabilities. However, our results suggest that heterogeneity is more in the slope than in the constant of the production function. In particular, allowing international firms to have different return to labour and capital inputs, we are able to account for their entire productivity premium. This has implications for both labour and capital market reforms.

FDI and Growth: What Cross-Country Industry Data Say

We simulate the macroeconomic and welfare implications of different fiscal consolidation scenarios in Italy using a medium scale two-areas dynamic general equilibrium currency-union model. Differently from similar models, ours is rich in the terms of fiscal features. We assume distortionary taxes (on labor income, capital income and consumption) and welfare-enhancing public expenditure. We distinguish between public spending on final goods and services, public employment and transfers to households. The scenarios that we consider envisage a decreases in the public debt to GDP ratio of 10 percentage points in 5 years. Based on our simulations we find that: first, fiscal distortions are quantitatively significant; second, a consolidation strategy that reduces expenditure and simultaneously lowers tax rates has a positive effect on long-run GDP of 5% to 7% and on welfare of 4% to 7% of the initial levels, depending on the composition of the adjustment; third, consumption and investment are stable or grow on impact and along the path to the new steady state; finally, spillovers to the rest of the euro area are expansionary and sizeable both in the long run and along the transition.

An EMU with Different Transmission Mechanisms

We develop and compute a dynamic equilibrium model where economies differ on the relative efficiency of financial intermediaries and, therefore on households portfolios and currency holdings. Our model economies have some of the features of the different financial structures in countries of the European Union and respond to monetary shocks in a way similar to the observed responses, which we also estimate. It follows that if differences on the relative efficiency of financial intermediaries persist in a monetary union, conflicts of interests in the pursuit of a common monetary policy can arise.

Hysteresis in Exports

This paper presents an empirical examination of the importance of hysteresis in international trade. An econometric model of export determination is developed where the presence of sunk costs causes discontinuous behavior and hysteresis so that individual exporters’ decision to stay in or out of the market depends on the current value of the exchange rate as well as its past history. The aggregate level of exports is then determined by the proportion of exporters that stay in the market. The resulting non-linear model is estimated using data on manufacturing exports for the United States, Germany, and Japan. The paper finds strong evidence in favor of the presence of pricing-to-market and hysteresis only in the case of Japanese exports.

Supply Chains and the Internalization of SMEs: Evidence from Italy

This paper explores the impact of being part of a supply chain on the internationalization of firms. We show that even small and less productive firms, if involved in production chains, can take advantage of reduced costs of entry and economies of scale that enhance their probability to become exporters. The empirical analysis is carried out on an original database, obtained by merging and matching balance sheet data with data from a survey on over 25,000 Italian firms, largely SMEs, which include direct information on the involvement in supply chains. We find a positive and significant impact of being part of a supply chain on the probability to export and on the intensive margin of trade. The number of foreign markets served (the extensive margin), on the other hand, does not seem to be affected. We also investigate whether being in different positions along the chain, i.e. upstream or downstream, matters and we find that downstream producers tend to benefit more. Our results are robust to different specifications, estimation methods, and to the inclusion of the control variables typically used in heterogeneous firm models.

Heterogeneity in managerial strategies and internationalization of firms: the case of Italy

The recent empirical literature on firm performance has highlighted the multidimensional concept of managerial strategies. The paper analyzes the nexus between these strategies and performance based on specific entrepreneurs’ characteristics, corporate strategies, organizational capabilities and firms’ approaches to internationalization. Using a dataset obtained by matching and merging Capitalia, ICE-Reprint and AIDA surveys we investigate the possible non-linear impact of managerial strategies on firm performance in Italy. While the specific entrepreneurs’ characteristics do not seem to have a significant impact on firm performance, the mode of internationalization plays an important role. Important non-linearities arise when we singled out the role of skilled workers and managers in determining a firm’s success in highly competitive markets.

Foreign direct investment in Sub-Saharan Africa: the land-energy nexus.

his paper explores recent patterns of foreign direct investments (FDI) in land in Sub-Saharan Africa (SSA), with the focus on investment in biofuel crops. It describes the drivers and features of this type of investment compared to general FDI trends in developing countries and SSA. The continent is one of the areas most targeted by international land acquisitions, especially for biofuel projects, but Africa’s increasing attractiveness in this sector is not without risks. Our Zero Inflated Poisson estimates for the number of large-scale international land deals in biofuels in Sub-Saharan countries identify land availability and abundance of water resources combined with weak land governance as significant drivers. These findings indirectly suggest that biofuel-oriented FDI in land on the sub-continent are driven by resource-seeking decisions.

The Effects of FDI on Growth and Inequality

North-South capital flows are likely to allow countries in the South to grow independently from their (low) domestic saving rate, thereby reducing possible financial constraints to growth. They allow the financing of balance-of-payments deficits in the early stages of development, so that a country can import intermediate and capital-intensive goods, which are essential for productive capacity. They improve the allocation of domestic and foreign capital and facilitate the transfer of technology and know-how. Hence, private capital flows have the potential to boost growth and to contribute to improvements in the standard of living in developing countries. This potential does not seem to have been fully exploited yet, especially in African countries.1