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(Not so) easy come, (still) easy go? Footloose multinationals revisited

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Author Info

  • Pierre Blanchard

    (University of Paris Est Créteil, ERUDITE)

  • Emmanuel Dhyne

    ()
    (National Bank of Belgium, Research Department
    Université de Mons)

  • Catherine Fuss

    ()
    (National Bank of Belgium, Research Department
    Université Libre de Bruxelles)

  • Claude Mathieu

    (University of Paris Est Créteil, ERUDITE)

Abstract

This paper revisits the "footloose" nature of multinational firms (MNFs) hypothesis. Using firm-level data for Belgium over the period 1997-2008, we rely on a Probit model and take into account the endogeneity of the determinants of firm exit. Our results may be summarised as follows. First, the unconditional exit probability of MNFs is lower than that of domestic firms. Second, controlling for firm and sector characteristics - firm age, Total Factor Productivity, sunk costs, size, competition on the product market, sector-level value added growth, and sector dummies - the difference between the exit probability of MNFs and domestic firms becomes positive. Third, our results show that MNFs have a lower sensitivity to sunk costs and size than do domestic firms, which may be interpreted as lower exit barriers due to greater possibilities of relocating tangible and intangible assets to foreign affiliates.

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File URL: http://www.nbb.be/doc/oc/repec/reswpp/wp223En.pdf
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Bibliographic Info

Paper provided by National Bank of Belgium in its series Working Paper Research with number 223.

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Length: 42 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:nbb:reswpp:201203-223

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Related research

Keywords: firm exit; multinationals; Total Factor Productivity; sunk costs; panel data; Probit model;

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Cited by:
  1. FERRAGINA, Anna Maria, 2013. "The Impact of FDI on Firm Survival and Employment: A Comparative Analysis for Turkey and Italy," CELPE Discussion Papers 127, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.

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