Abstract

Better performances of multinational firms and exporters with respect to domestic firms have been widely documented in the literature, but the sources of these premia have largely remained a black box. Using an original dataset on Italian firms, we find that the higher use of knowledge workers (such as R&D workers, as well as workers in managerial and clerical occupations) explain some of the TFP premium of exporters and multinational firms. However, our results suggest that is not only a matter of which inputs are used, but also how they are used. In fact, allowing for different returns to inputs (i.e. a different shape of the production function) between domestic and international firms, we explain all of the productivity premium and beyond. This is the result of the fact that international firms exhibit higher returns to production workers, and, among them, multinationals firms use capital and managers better than domestic firms. This is consistent with the idea that international firms have superior organizational capabilities and managerial practices.