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Outward Foreign Direct Investment and Domestic Performance: the Italian Manufacturing and Services Sectors

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  • Cesare Imbriani
  • Rosanna Pittiglio
  • Filippo Reganati

Abstract

How does outward foreign direct investment (FDI) affect employment and productivity growth in the home country? Does the impact of outward investment differ among manufacturing and service sectors? In this paper we analyze the effects of investing abroad using firm-level data for Italy for the period 2003–2006. We adopt matching techniques in combination with a difference-in-difference estimator in order to investigate the causal effect of becoming multinational on domestic employment and productivity. Preliminary results suggest that Italian outward FDI has limited effects on domestic employment and performance of internationalizing firms on average. However, results significantly differ depending on the sector (manufacturing versus services) where the MNEs are operating. In particular, we find that while in the manufacturing sector, outward FDI tends to strengthen both productivity and, to less extent, employment. In the service sector, we find a negative effect on employment (two years after the investment). Copyright International Atlantic Economic Society 2011

Suggested Citation

  • Cesare Imbriani & Rosanna Pittiglio & Filippo Reganati, 2011. "Outward Foreign Direct Investment and Domestic Performance: the Italian Manufacturing and Services Sectors," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(4), pages 369-381, December.
    • Handle: RePEc:kap:atlecj:v:39:y:2011:i:4:p:369-381
    DOI: 10.1007/s11293-011-9285-z
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    Cited by:

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    2. Natália Barbosa, 2022. "Outward FDI, restructuring, performance upgrading and resilience: Firm-level evidence from Portugal," GEE Papers 0168, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Sep 2022.
    3. MATSUURA Toshiyuki, 2015. "Impact of Extensive and Intensive Margins of FDI on Corporate Domestic Performance: Evidence from Japanese automobile parts suppliers," Discussion papers 15032, Research Institute of Economy, Trade and Industry (RIETI).
    4. Rosanna Pittiglio & Filippo Reganati, 2016. "Vertical Spillovers from Multinational Enterprises: Does Technological Gap Matter?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(3), pages 313-323, June.
    5. Natália Barbosa, 2023. "Outward Foreign Direct Investment, Restructuring and Performance Upgrading: Firm-level Evidence from Portugal," Global Business Review, International Management Institute, vol. 24(2), pages 281-294, April.
    6. Nur FERIYANTO & Jaka SRIYANA, 2016. "Labor Absorption Under Minimum Wage Policy In Indonesia," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 11-21, June.
    7. Michele Imbruno & Rosanna Pittiglio & Filippo Reganati, 2015. "FDI, Intermediate Inputs and Firm Performance: Theory and Evidence from Italy," Discussion Papers 2015-15, University of Nottingham, GEP.
    8. Prajukta Tripathy & Pragyanrani Behera & Bikash Ranjan Mishra, 2023. "Study of linkages between productivity, export, and outward foreign direct investment: An empirical perspective of Indian manufacturing industries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1527-1548, April.
    9. Hayakawa, Kazunobu & Matsuura, Toshiyuki & Motohashi, Kazuyuki & Obashi, Ayako, 2013. "Two-dimensional analysis of the impact of outward FDI on performance at home: Evidence from Japanese manufacturing firms," Japan and the World Economy, Elsevier, vol. 27(C), pages 25-33.
    10. Md. Monirul Islam & Mohammad Tareque & Abu N. M. Wahid & Md. Mahmudul Alam & Kazi Sohag, 2022. "Do the Inward and Outward Foreign Direct Investments Spur Domestic Investment in Bangladesh? A Counterfactual Analysis," JRFM, MDPI, vol. 15(12), pages 1-22, December.
    11. Cesare Imbriani & Rosanna Pittiglio & Filippo Reganati, 2014. "Affiliates and parent employment through foreign direct investment: a study case of substitutability or complementarity," International Economics and Economic Policy, Springer, vol. 11(4), pages 619-638, December.
    12. Kuusi, Tero & Ali-Yrkkö, Jyrki, 2021. "BITs with a Bite? EU Home Investment Effects of EU-China Bilateral Investment Treaties," ETLA Reports 115, The Research Institute of the Finnish Economy.
    13. Kazunobu Hayakawa & Toshiyuki Matsuura & Kazuyuki Motohashi, 2016. "How Does FDI Affect Productivity at Home?: Evidence from a Plant-Level Analysis," Journal of Industry, Competition and Trade, Springer, vol. 16(4), pages 403-422, December.
    14. Huang, Youxing & Zhang, Yan, 2017. "How does outward foreign direct investment enhance firm productivity? A heterogeneous empirical analysis from Chinese manufacturing," China Economic Review, Elsevier, vol. 44(C), pages 1-15.
    15. Pravakar Sahoo & Ashwani Bishnoi, 2021. "IMPACT OF OUTWARD FDI: Evidence from Emerging Economies for Policy," IEG Working Papers 433, Institute of Economic Growth.
    16. Hongfeng Peng & Jingwen Yu, 2021. "Absorptive capacity and quality upgrading effect of OFDI: Evidence from China," Pacific Economic Review, Wiley Blackwell, vol. 26(5), pages 651-671, December.
    17. Sahoo, Pravakar & Bishnoi, Ashwani, 2021. "Impact of outward foreign direct investment: Evidence from Asia," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 1131-1148.
    18. Safet Kurtović & Nehat Maxhuni & Blerim Halili & Bujar Krasniqi, 2022. "Does outward foreign direct investment crowd in or crowd out domestic investment in central, east and southeast europe countries? an asymmetric approach," Economic Change and Restructuring, Springer, vol. 55(3), pages 1419-1444, August.
    19. Naveen Rai & Lena Suchanek & Maria Bernier, 2018. "Does Outward Foreign Investment Matter for Canadian Productivity? Evidence from Greenfield Investments," Staff Working Papers 18-31, Bank of Canada.
    20. Damijan, Jože & Kostevc, Crt & Rojec, Matija, 2014. "Outward FDI and company performance in CEECs," Working Paper Series in Economics and Institutions of Innovation 381, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

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    More about this item

    Keywords

    MNEs; Propensity score matching; Productivity; Employment; F23; D21; C14;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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