Effects of Foreign Ownership On Innovation Activities: Empirical Evidence for Twelve European Countries
AbstractIn the present study we investigate the relationship between foreign ownership and innovation activities using the firm-level data of the third Community Innovation Survey (CIS) covering twelve European countries. Probit estimates based on 28,000 firms' observations show that foreign-owned firms are more innovative than domestic firms, particularly in the New EU Member States. However, results from the Blinder-Oaxaca decomposition of the differences in the percentage of innovating firms between foreign-owned and domestic firms reveals that the differences are mainly due to the different firm characteristics rather than the differences in coefficients. In particular, the dominance of foreign-owned firms in the largest firm size group is the main factor contributing to the gap in the percentage of innovators between foreign-owned firms and domestic firms. Furthermore, using the fractional logit model, we find that in the New EU Member states, foreign ownership has a positive and significant impact on the share of market novelties as well as on the share of new products in turnover. In this case, the results from the Blinder-Oaxaca decomposition analysis indicate that the ownership difference in the share of innovative sales is not due to the differences in the observed firms' characteristics.
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Bibliographic InfoArticle provided by National Institute of Economic and Social Research in its journal National Institute Economic Review.
Volume (Year): 204 (2008)
Issue (Month): 1 (April)
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Foreign ownership; multinational firms; product and process innovations;
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- Fagerberg, Jan & Srholec, Martin & Verspagen, Bart, 2009.
"Innovation and Economic Development,"
MERIT Working Papers
032, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
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LSE Research Online Documents on Economics
33593, London School of Economics and Political Science, LSE Library.
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