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Foreign acquisitions, domestic multinationals, and R&D

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  • Roger Bandick
  • Holger Görg
  • Patrik Karpaty

Abstract

The aim of this paper is to evaluate the causal effect of foreign acquisition on R&D intensity in targeted domestic firms. We are able to distinguish domestic multinationals and non-multinationals, which allows us to investigate the fear that the change in ownership of domestic to foreign multinationals leads to a reduction in R&D activity in the country, as headquarter activities are relocated to the new owner’s home country. We use unique and rich firm level data for the Swedish manufacturing sector and different micro-econometric estimation strategies in order to control for the potential endogeneity of the acquisition dummy. Overall, our results give no support to the fears that foreign acquisition of domestic firms lead to a brain drain of R&D activity in Swedish MNEs. Rather, this paper finds robust evidence that foreign acquisitions lead to increasing R&D intensity in acquired domestic MNEs and non-MNEs

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1651.

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Length: 29 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:kie:kieliw:1651

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Keywords: domestic multinationals; foreign acquisition; R&D; propensity score matching;

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References

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  1. Kristiina Huttunen, 2007. "The Effect of Foreign Acquisition on Employment and Wages: Evidence from Finnish Establishments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 497-509, August.
  2. Ekholm, Karolina & Hakkala, Katariina, 2003. "Location of R&D and High-Tech Production by Vertically-Integrated Multinationals," CEPR Discussion Papers 4078, C.E.P.R. Discussion Papers.
  3. Blomström, Magnus & Fors, Gunnar & Lipsey, Robert E., 1997. "Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden," Working Paper Series, Research Institute of Industrial Economics 490, Research Institute of Industrial Economics.
  4. Beata Javorcik & Jens Matthias Arnold, 2009. "Gifted Kids or Pushy Parents? Foreign Direct Investment and Plant Productivity in Indonesia," Economics Series Working Papers 434, University of Oxford, Department of Economics.
  5. Volker Nocke & Stephen Yeaple, 2008. "An Assignment Theory of Foreign Direct Investment," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 529-557.
  6. Bertrand, Olivier, 2009. "Effects of foreign acquisitions on R&D activity: Evidence from firm-level data for France," Research Policy, Elsevier, vol. 38(6), pages 1021-1031, July.
  7. Barba Navaretti, Giorgio & Castellani, Davide & Disdier, Anne-Célia, 2006. "How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy," CEPR Discussion Papers 5765, C.E.P.R. Discussion Papers.
  8. Patrik Karpaty, 2006. "Does Multinationality Matter? Evidence from Swedish firm data," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, Duncker & Humblot, Berlin, vol. 52(2), pages 101-122.
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Citations

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Cited by:
  1. Joachim Wagner, 2011. "Productivity and International Firm Activities: What do we know?," Working Paper Series in Economics 194, University of Lüneburg, Institute of Economics.
  2. María García-Vega & Patricia Hofmann & Richard Kneller, . "The Internationalisation of R&D and the Knowledge Production Function," Discussion Papers 12/02, University of Nottingham, GEP.
  3. Karpaty, Patrik & Tingvall, Patrik Gustavsson, 2011. "Offshoring and Home Country R&D," Working Paper Series in Economics and Institutions of Innovation 254, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  4. Gabor Hunya, 2012. "The Role of Multinational Companies in International Business Integration," wiiw Research Reports 384, The Vienna Institute for International Economic Studies, wiiw.
  5. Commission of Experts for Research and Innovation (EFI), Berlin (ed.), 2012. "Research, innovation and technological performance in Germany - EFI Report 2012," Research, innovation and technological performance in Germany: Report, Expertenkommission Forschung und Innovation (EFI), volume 127, number 2012e, October.

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