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A closer look at the productivity advantage of foreign affiliates

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Author Info
KOEN DE BACKER
LEO SLEUWAEGEN

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Abstract

In analyzing firm productivity in Belgium, this article shows empirically that both scale and efficiency contribute positively to the typical productivity advantage of foreign affiliates. Stochastic production frontier estimation using the translog functional form indicates that foreign subsidiaries exploit economies of scale more fully and benefit from better (transferred) technological capabilities than Belgian national firms (i.e., Belgian owned firms without subsidiaries abroad). Belgian multinational enterprises (MNEs), i.e., Belgian owned firms with at least one subsidiary abroad, resemble foreign-based MNEs in possessing specific technological advantages. While the increasing globalization has facilitated the realization of scale effects across borders, this article shows that the development of technological capabilities/advantages is still a prerequisite for MNEs to compete successfully abroad.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 12 (2005)
Issue (Month): 1 (February)
Pages: 17-34
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Handle: RePEc:taf:ijecbs:v:12:y:2005:i:1:p:17-34

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Related research
Keywords: Multinational Firms; Productivity; Efficiency; JEL Classification: F23; L10; M20;

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References listed on IDEAS
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    Other versions:
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    Other versions:
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  7. Sourafel Girma & Steve Thompson & Peter W. Wright, 2002. "Why are Productivity and Wages Higher in Foreign Firms?," The Economic and Social Review, Economic and Social Studies, vol. 33(1), pages 93-100. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ana Teresa Tavares & Aurora A.C. Teixeira, 2006. "Is Human Capital a Significant Determinant of Portugal’s FDI Attractiveness?," FEP Working Papers 211, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  2. Ana Teresa Tavares & Aurora A. C. Teixeira, 2005. "Human Capital Intensity in Technology-Based Firms Located in Portugal: Do Foreign Multinationals Make a Difference?," FEP Working Papers 187, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
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