The internalization of exports: Firm- and location-specific factors in a middle-income country

Firms make strategic choices about foreign market access on the basisof loc ation factors in the home and export countries, as well as on their ownersh ip advantages. The empirical analysis is based on a sample of 837 manufactu ring companies in a typical middle-income country (Spain), in which firms a re starting to internationalize through investments or alliances in distrib ution. Following theoretical expectations, the greater the level of such ow nership factors as intangible technological assets, product variability, an d resource availability, the higher the likelihood of internalization, and in particular internalization by proprietary distribution instead of by com mercial alliance. But most importantly, location factors in the home countr y and in the export market have an independent effect on the likelihood and mode of internalization. Proprietary distribution channels are preferred w hen the firm's competitors are based in richer countries than the home coun try, and when the export market is well known to the firm.