The determinants of small and medium-sized firm internationalization and its relationship with productive efficiency

The creation of sale structures abroad (CSSA) is an intermediate stage in t he process of internationalization when firms are small and foreign direct investment entail high sunk costs. This paper finds that ownership concentr ation (technological innovation, size, and age) negatively (positively) aff ects the CSSA decision and that, after controlling for the effect of access to foreign markets under the form of exports, CSSA firms are significantly more efficient than the control sample when efficiency is measured with a stochastic frontier approach. Ownership concentration seems to have two off setting effects on efficiency: it increases participation to profits and th erefore incentives to perform well, while it leads controlling shareholders to underinvest in risky ventures (such as internationalization).