The Innovation and Productivity Effect of Foreign Take-Over of National Assets
AbstractOver the past decades, there has been a dramatic increase in the foreign-ownership of firms in the four Nordic countries Denmark, Finland, Norway and Sweden. This increase has generated interest in the welfare effect of foreign take-over of national assets. In this paper we ask: how would a firm’s behaviour and performance have been if a foreign owner had not acquired the firm? The analysis is based on a sample of 5 186 firm-level observations in four Nordic countries, of which close to 30 percent are owned by foreign companies. Using an empirical approach that accounts for both selection bias and simultaneity bias, we establish some new findings regarding foreign ownership. First, no robust difference in the propensity to be innovative can be established. Second, among the group of innovative firms, foreign-owned multinationals are generally outperformed by domestic multinationals in R&D and innovation engagement. Third, despite the fact that domestic multinationals are considerably more involved in national innovation systems than other firms, they are not producing more innovation per R&D-dollar, controlling for firm size, human capital and industry. Finally, we find that foreign take-over of firms is neutral with respect to labour productivity, and hence that no evidence of welfare gain or welfare drain of foreign ownership can be established.
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Bibliographic InfoPaper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 141.
Length: 32 pages
Date of creation: 09 Sep 2008
Date of revision:
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Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
Web page: http://www.infra.kth.se/cesis/
More information through EDIRC
Multinational enterprises; Take-Over; Corporate Governance; Cross-country comparison; Spillovers; R&D; Innovation; Productivity;
Find related papers by JEL classification:
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-20 (All new papers)
- NEP-EFF-2008-09-20 (Efficiency & Productivity)
- NEP-INO-2008-09-20 (Innovation)
- NEP-IPR-2008-09-20 (Intellectual Property Rights)
- NEP-KNM-2008-09-20 (Knowledge Management & Knowledge Economy)
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