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Does foreign ownership matter?: Multinational firms, productivity and spillovers
Örebro University, Department of Business, Economics, Statistics and Informatics.ORCID iD: 0000-0002-5830-9831
2005 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of four essays dealing with the role of foreign owned firms for the development of productivity and exports in Swedish manufacturing. The essays share a common theme, i.e. that multinational firms (MNF) possess some intangible assets that could be transferred to their affiliates.

In Chapter II we find that the foreign-owned firms in Swedish manufacturing have a higher productivity (both level and growth) compared to Swedish domestic firms even after controlling for other variables affecting productivity. Moreover, this is not due to reverse causality, i.e. that foreign investors tend to acquire the most productive Swedish firms and that this would explain the difference in productivity. We also find that Swedish MNFs are as productive as foreign-owned firms and that the productivity effect of foreign ownership may differ according to mode of entry. Greenfield operations are found to be more productive than those in acquired firms.

Chapter III revisits the question of whether ownership matters for productivity performance. An extensive literature has shown that it is important to study the counterfactual outcome, i.e. what would the outcome be had the domestic firm never been acquired? We use a propensity score matching estimator to compare similar treated and untreated firms. We then apply the difference-in-difference estimator and show that there is a positive effect on productivity due to foreign acquisition. Moreover, this effect on productivity does not occur immediately but starts around three years post acquisition. Foreign ownership is also found to boost productivity growth, not just the level of productivity.

In Chapter IV we analyze whether FDI stimulates the productivity performance in domestic firms in the same industry and/or region or not. While most other studies using firm level data find no evidence of such externalities from FDI, we provide strong evidence for the existence of spillover effects from inward FDI to domestic firms. These spillover effects cannot be explained by reverse causality. We also find that the magnitude of these spillover effects depends on the absorptive capacity (measured as R&D expenditures) of the domestic firms and the nationality of the parent MNF.

The last study in this thesis, Chapter V considers whether the effect of increased inward FDI has a positive or negative effect on domestic firms export behavior. The first case may occur as a result of demonstration effects, when local firms learn from foreign MNF to reduce exporting costs. The second may reveal congestion effects, defined here as the case when MNF contribute to congestion of e.g. transport networks or in general add to demand for inputs, driving up their prices, thus increasing costs of exporting for local firms. We also consider whether FDI affect the sunk costs or variable costs of exporting. Our results indicate that congestion effects dominate since increased inward FDI has led to a significant reduction in the probability of export market participation.

Place, publisher, year, edition, pages
Örebro: Örebro universitetsbibliotek , 2005. , p. 5
Series
Örebro Studies in Economics, ISSN 1651-8896 ; 8
Keywords [en]
FDI, Multinational firms, productivity, export, spillovers
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:oru:diva-205ISBN: 91-7668-462-8 (print)OAI: oai:DiVA.org:oru-205DiVA, id: diva2:135817
Public defence
2006-01-27, Bion, Forumhuset, Örebro universitet, Örebro, 10:00
Opponent
Supervisors
Available from: 2006-01-06 Created: 2006-01-03 Last updated: 2017-10-18Bibliographically approved
List of papers
1. Are foreign owned firms more productive?: Evidence from Swedish firm data
Open this publication in new window or tab >>Are foreign owned firms more productive?: Evidence from Swedish firm data
2004 (English)Report (Other academic)
Place, publisher, year, edition, pages
Örebro: Örebro universitet, 2004. p. 31
Series
Working paper series, ESI, ISSN 1403-0586 ; 6
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:oru:diva-2961 (URN)
Available from: 2006-01-06 Created: 2006-01-06 Last updated: 2017-10-18Bibliographically approved
2. Productivity effects of foreign acquisitions in Swedish manufacturing: the FDI productivity issue revisited
Open this publication in new window or tab >>Productivity effects of foreign acquisitions in Swedish manufacturing: the FDI productivity issue revisited
2007 (English)In: International Journal of the Economics of Business, ISSN 1357-1516, E-ISSN 1466-1829, Vol. 14, no 2, p. 241-260Article in journal (Refereed) Published
Abstract [en]

This study analyzes the difference between foreign and domestic ownership of firms with respect to productivity. Recent literature has shown that it is important to study the counter-factual outcome, i.e. what would the outcome be had the domestic firm never been acquired? The analysis is based on a panel of Swedish firm level data. In order to isolate the casual effects due to a takeover a propensity score matching estimator is applied to compare similar treated and untreated firms. The difference-in-difference estimations show that there is a positive effect of foreign acquisition on productivity. Foreign acquisitions increase the productivity in the acquired Swedish firms by between 3 and 11% depending on the estimator chosen. Moreover, this productivity difference does not occur immediately but starts between 1-5 years post acquisition.

National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:oru:diva-2962 (URN)10.1080/13571510701344038 (DOI)
Available from: 2006-01-06 Created: 2006-01-06 Last updated: 2017-12-14Bibliographically approved
3. Foreign direct investment and productivity spillovers in Swedish manufacturing
Open this publication in new window or tab >>Foreign direct investment and productivity spillovers in Swedish manufacturing
2004 (English)Report (Other academic)
Abstract [en]

Based on a panel of data for Swedish manufacturing firms in 1990-2000, this paper finds strong evidence for the existence of positive spillover effects from inward FDI. The presence of foreign ownership in the same industry and region seems to  enhance the total factor productivity of domestic firms. Moreover, the size of these FDI spillover effects seems to depend both on the nationality of the foreign MNF as well as on the absorptive capacity of the domestic firm, measured by its own R&D. It appears that this positive relationship between foreign presence and productivity cannot be explained as a consequence of reverse causality, i.e that FDI is attracted to highly productive regions and industries.

Place, publisher, year, edition, pages
Stockholm: FIEF, 2004. p. 28
Series
FIEF working paper series, ISSN 1651-0852 ; 194
Keywords
Multinational firms, Productivity spillovers, Foreign direct investment
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:oru:diva-2963 (URN)
Available from: 2006-01-06 Created: 2006-01-06 Last updated: 2017-10-18Bibliographically approved
4. Demonstration or congestion?: Export spillovers in Sweden
Open this publication in new window or tab >>Demonstration or congestion?: Export spillovers in Sweden
(English)Manuscript (preprint) (Other academic)
Abstract [en]

A key feature of the Swedish economy over the last two decades has been the rapid internationalisation of its economy, both through FDI and exports. In this paper we consider their inter-relationship, examining whether there have been spillovers from foreign firms to the export performance of domestic firms. We also contribute to the empirical modelling of export spillovers. We do this by exploiting information on whether foreign MNE sales are intra-firm or inter-firm, and by allowing for heterogeneity in the characteristics of the sender and receiver of spillovers. Our results indicate that foreign MNEs had positive effects on Swedish exports.

National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:oru:diva-2964 (URN)
Available from: 2006-01-06 Created: 2006-01-06 Last updated: 2017-10-18Bibliographically approved

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