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Blessing or Curse? Domestic Plants' Survival and Employment Prospects after Foreign Acquisitions

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  • Girma, Sourafel

    ()
    (University of Nottingham)

  • Görg, Holger

    ()
    (Kiel Institute for the World Economy)

Abstract

This paper investigates whether the acquisition of a domestic establishment by a foreign owner has any effects on the survival prospects and employment growth of that plant. The analysis uses plant level data for the UK electronics and food industries for the period 1980 to 1993. We control for possible endogeneity using a matched sample of firms and instrumental variables. Estimating a standard hazard model yields the result that foreign takeover reduces the liftetime of the acquired plant in both the electronics and food sectors. Estimations of the determinants of employment growth in domestic plants provide some evidence that the incidence of takeover reduces employment growth, in particular for unskilled labour in the electronics industry. There is no significant effect for the food sector, however.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 706.

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Length: 35 pages
Date of creation: Jan 2003
Date of revision:
Publication status: published in: Applied Economics Quarterly, 2004, 50 (1), 89-110
Handle: RePEc:iza:izadps:dp706

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Keywords: foreign direct investment; acquisitions; survival; employment growth;

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References

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Citations

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Cited by:
  1. Almeida, Rita K., 2003. "The Effects of Foreign Owned Firms on the Labor Market," IZA Discussion Papers 785, Institute for the Study of Labor (IZA).
  2. Almeida, Rita, 2007. "The labor market effects of foreign owned firms," Journal of International Economics, Elsevier, vol. 72(1), pages 75-96, May.
  3. Roger Bandick & Holger Görg, . "Foreign Acquisitions, Plant Survival, and Employment Growth," Discussion Papers 09/13, University of Nottingham, GEP.
  4. Lucia Piscitello & Larissa Rabbiosi, 2005. "The impact of inward FDI on local companies' labour productivity: evidence from the Italian case," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(1), pages 35-51.
  5. Joel Stiebale & Michaela Trax, 2011. "The effects of cross-border M&As on the acquirers' domestic performance: firm-level evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 44(3), pages 957-990, August.
  6. Lehto, Eero & Böckerman, Petri, 2006. "Enemy of Labour? Analysing the Employment Effects of Mergers and Acquisitions," MPRA Paper 1812, University Library of Munich, Germany.
  7. Sule Ozler & Erol Taymaz, 2004. "Does foreign ownership matter for survival and growth? Dynamics of competition and foreign direct investment," ERC Working Papers 0406, ERC - Economic Research Center, Middle East Technical University, revised Mar 2004.
  8. Christian Bellak, 2004. "How Domestic and Foreign Firms Differ and Why Does it Matter?," Journal of Economic Surveys, Wiley Blackwell, vol. 18(4), pages 483-514, 09.
  9. Erol Taymaz & Şule Özler, 2007. "Foreign Ownership, Competition, and Survival Dynamics," Review of Industrial Organization, Springer, vol. 31(1), pages 23-42, August.
  10. Bandick, Roger & Karpaty, Patrick, 2007. "Foregin Acquisition and Employment Effects in Swedish Manufacturing," Working Papers 2007:10, Örebro University, School of Business.
  11. Mats Bergman & Per Johansson, 2011. "Foreign ownership and investment: do firms locate investments close to the headquarter?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(4), pages 621-642, November.
  12. Ronald Bachmann & Daniel Baumgarten & Joel Stiebale, 2011. "Cross-border Investment, Heterogeneous Workers, and Employment Security – Evidence from Germany," Ruhr Economic Papers 0268, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  13. Andrew Burke & Holger Görg & Aoife Hanley, 2008. "The impact of foreign direct investment on new firm survival in the UK: evidence for static versus dynamic industries," Small Business Economics, Springer, vol. 31(4), pages 395-407, December.

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