A closer look at the productivity advantage of foreign affiliates
AbstractIn 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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Volume (Year): 12 (2005)
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Find related papers by JEL classification:
- JEL - Labor and Demographic Economics - - - - -
- Cla - Mathematical and Quantitative Methods - - - - -
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- M20 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - General
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