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Do Foreign-Owned Firms Have a Lower Innovation Intensity Than Domestic Firms?

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Author Info
Martin Falk (WIFO)
Rahel Falk (WIFO)

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Abstract

This paper addresses the question of whether foreign ownership matters regarding innovation intensity. It is well documented that foreign firms display lower innovation and R&D intensity than local firms do. However, (foreign) investors bear not only innovation performances in mind when making up their investment decisions. Unless factors such as firm size, labour productivity, skill and export intensity, sectoral affiliation and geographical area of operation are not properly controlled for, one is running the risk of comparing apples and oranges. To account for the selectivity bias we employ matching estimators when comparing the innovation intensity between domestic and foreign-owned firms. The observed gaps in innovation intensities do not only survive this matching test, but turn out higher as compared to the results that would have been derived from conventional regression analyses.

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Publisher Info
Paper provided by WIFO in its series WIFO Working Papers with number 275.

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Length: 21 pages
Date of creation: 05 Jul 2006
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Handle: RePEc:wfo:wpaper:y:2006:i:275

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Related research
Keywords: Foreign ownership; Multinational firms; propensity score matching; innovation expenditures.;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June. [Downloadable!] (restricted)
  2. Rachel Griffith & Stephen Redding & Helen Simpson, 2004. "Foreign ownership and productivity: new evidence from the service sector and the R&D lab," IFS Working Papers W04/22, Institute for Fiscal Studies. [Downloadable!]
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  3. Marco Caliendo & Sabine Kopeinig, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," IZA Discussion Papers 1588, Institute for the Study of Labor (IZA). [Downloadable!]
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  4. Almus, Matthias & Czarnitzki, Dirk, 2003. "The Effects of Public R&D Subsidies on Firms' Innovation Activities: The Case of Eastern Germany," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(2), pages 226-36, April.
  5. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Blackwell Publishing, vol. 65(2), pages 261-94, April. [Downloadable!] (restricted)
  6. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Blackwell Publishing, vol. 64(4), pages 605-54, October. [Downloadable!] (restricted)
  7. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353. [Downloadable!] (restricted)
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  8. Ebersberger, Bernd & Lööf, Hans, 2004. "Multinational Enterprises, Spillovers, Innovation and Productivity," Working Paper Series in Economics and Institutions of Innovation 22, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
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Cited by:
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  1. Joel Stiebale & Frank Reize, 2008. "The Impact of FDI on Innovation in Target Firms," Ruhr Economic Papers 0050, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
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