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The Innovation and Productivity Effect of Foreign Take-Over of National Assets

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Author Info

  • Johansson, Börje

    ()
    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Lööf, Hans

    ()
    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Ebersberger, Bernd

    (MCI)

Abstract

Over 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 Info

Paper 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.

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Length: 32 pages
Date of creation: 09 Sep 2008
Date of revision:
Handle: RePEc:hhs:cesisp:0141

Contact details of provider:
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/
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Keywords: Multinational enterprises; Take-Over; Corporate Governance; Cross-country comparison; Spillovers; R&D; Innovation; Productivity;

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References

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Cited by:
  1. Gabor Hunya, 2012. "The Role of Multinational Companies in International Business Integration," wiiw Research Reports 384, The Vienna Institute for International Economic Studies, wiiw.
  2. Sandra M. Leitner & Robert Stehrer, 2013. "R&D and Non-R&D Innovators in the Financial Crisis: the Role of Binding Credit Constraints," wiiw Working Papers 95, The Vienna Institute for International Economic Studies, wiiw.

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