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European Firms in a Global Economy (EFIGE)
Nations do not trade, nor do sectors. It is firms that trade. This simple truth makes it
clear that understanding the firm-level facts is essential to good policy-making in
Europe. The view that it is important to focus on the firm rather than the sector is the
single most important message of recent developments in international economics.
What are the features of European firms that successfully compete in international markets?
To what extent do they contribute to productivity and employment? Does access to foreign
markets enhance firm performance through a learning process? Why are some countries more
successful in international trade and FDI? What are the policies that can improve a
nation's foreign trade performance? Does integration within the Single Market foster
productivity improvements? Has the euro led to a wider participation of firms in
cross-border business? What policies can promote the participation of other European
firms that are currently excluded from international markets? What are the gains and the
adjustments involved in reducing barriers to trade and foreign direct investment (FDI)?
What policies can best maximise gains and smooth adjustments?
Until recently, economists and practitioners had very different views on these issues.
Economists tended to assume that trade and FDI opening affected sectors differently but
firms similarly. Practitioners viewed them as a selection process in which some firms
thrived and others went bankrupt. There was a disconnect between trade models and the
fact that, since firms are heterogeneous, they fared differently under the pressure of
foreign competition. Recent developments in trade theory have bridged this gap by
introducing firm heterogeneity. In this new framework, trade and FDI opening affect not
only sectors but also firm-level employment and productivity within sectors. There is a
growing consensus that these questions are best treated using firm-level trade and (FDI)
data, but progress has been difficult to achieve, in terms of both scientific research and policy-making, because of the severe constraints on firm-level data
availability in Europe. First, general information on firms is not always available.
Second, the available data do not reveal the same information across countries.
Third, important differences in coverage and method reduce the comparability of the
data that is available. Fourth, even when available on a comparable basis, firm-level
data collected across Europe are not oriented toward exports and FDI.
The aim of the
project is to address the above questions by generating new data by careful matching
of existing firm-level datasets and by supplementing the limitations of existing data
by collecting new original in a coordinated fashion. A key obstacle that will be removed
is the absence in the existing datasets of detailed information on the modes of
internationalisation that involve cross-border production networks. The present project
builds on the achievements of the network on 'European Firms and the International
Market' (EFIM), coordinated by Bruegel and the Centre for Economic Policy Research (CEPR).
This network brought together research teams from institutions based in the EU and
involved, either jointly or individually, in a wide range of highly successful
research projects based on firm-level data. Its aim was to use national firm-level
data to carry out comparative cross-European analysis of internationalisation. The
outcome was the recently published report 'The Happy Few: The internationalisation
of European firms' (Mayer and Ottaviano, 2007), which showed the policy relevance
of tackling this issue at the firm level. This project will push forward earlier
research efforts and combine them within a coherent framework. The construction
of consistent cross-country specific data sets will provide an invaluable research
tool for scholars and policy-makers, far beyond our research network. Research will
both build on these surveys and exploit existing data sets. It will combine in-depth
country analyses and policy reports with the overarching cross-country studies of
specific issues wherever possible. Comparing how similar sets of factors affect
internationalisation choices in different countries will provide an invaluable
opportunity to understand how different institutional and regulatory frameworks
at the national level may enhance or hinder competitiveness at the firm level.
| Scientific Coordinator | Institution |
| Gianmarco Ottaviano | Bruegel |
| Georges Siotis | Universidad Carlos III de Madrid |
| Lionel Fontagné | Centre d'Etudes Prospectives et d'Informations Internationales (CEPII) |
| Thierry Mayer | CEPR |
| László Halpern | The Institute of Economics of Hungarian Academy of Sciences (IEHAS) |
| Claudia Buch | Institute for Applied Economic Research Tuebingen (IAW) |
| Giorgio Barba Navaretti | Centro Studi Luca D'agliano (Lda) |
| Elena Belli | Unicredit |
| Mauro Pisu | National Bank of Belgium * |
| Guillaume Gaulier | Banque de France * |
| Rubén Segura-Cayuela | Banco de Espańa * |
| Matteo Bugamelli | Banca d'Italia * |
| Stefano Scarpetta | OECD, Economics Department * |
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