Advanced Search
MyIDEAS: Login to save this paper or follow this series

How Domestic and Foreign Firms Differ and Why Does It Matter?

Contents:

Author Info

  • Christian Bellak

    ()
    (Department of Economics, Vienna University of Economics & B.A.)

Abstract

This paper reviews and summarises the results of selected studies on performance gaps between multinational enterprises and their domestic counterparts. Performance gaps arise in such fields as productivity, technology, profitability, wages, skills and growth. While these gaps are often attributed to foreign ownership of the affiliates, the theory of the Multinational Enterprise argues that these gaps are due to being a Multinational rather than the nationality of the firm. Empirical evidence on the existence of performance gaps between foreign and domestic firms is supportive of this view: foreign ownership turns out to be a much less important explanatory factor than normally assumed. Firm-specific assets and firm characteristics like industry, size, parent country and multinationality per se are more important. Such results are broadly consistent with those derived in the literatures on ownership change, on foreign entry and on spillovers. We conclude that there is little case for foreign direct investment promotion policies to discriminate between firms on the basis of ownership.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.wu-wien.ac.at/inst/vw1/papers/wu-wp87.pdf
Our checks indicate that this address may not be valid because: 404 Not Found (http://www.wu-wien.ac.at/inst/vw1/papers/wu-wp87.pdf [301 Moved Permanently]--> http://www.wu.ac.at/inst/vw1/papers/wu-wp87.pdf). If this is indeed the case, please notify (Department of Economics)
Download Restriction: no

Bibliographic Info

Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp087.

as in new window
Length:
Date of creation: Jan 2004
Date of revision:
Handle: RePEc:wiw:wiwwuw:wuwp087

Note: PDF Document
Contact details of provider:
Postal: Welthandelsplatz 1, 1020 Vienna, Austria
Web page: http://www.wu.ac.at/economics/en

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Peter J Buckley & Mark C Casson, 1998. "Analyzing Foreign Market Entry Strategies: Extending the Internalization Approach," Journal of International Business Studies, Palgrave Macmillan, vol. 29(3), pages 539-561, September.
  2. Cohen, Benjamin I, 1973. "Comparative Behavior of Foreign and Domestic Export Firms in a Developing Economy," The Review of Economics and Statistics, MIT Press, vol. 55(2), pages 190-97, May.
  3. Haaland, Jan I. & Wooton, Ian, 1998. "International Competition for Multinational Investment," CEPR Discussion Papers 1937, C.E.P.R. Discussion Papers.
  4. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August.
  5. Alan Rugman, 1980. "Internalization as a general theory of foreign direct investment: A re-appraisal of the literature," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 116(2), pages 365-379, June.
  6. Cousineau, J.M. & Lacroix, R. & Vachon, D., 1989. "Foreign Ownership and Strike Activity in Canada," Cahiers de recherche 8927, Universite de Montreal, Departement de sciences economiques.
  7. Figini, Paolo & Görg, Holger, 1999. "Multinational companies and wage inequality in the host country: the case of Ireland," Open Access Publications from Kiel Institute for the World Economy 2344, Kiel Institute for the World Economy (IfW).
  8. Willmore, Larry N., 1986. "The comparative performance of foreign and domestic firms in Brazil," World Development, Elsevier, vol. 14(4), pages 489-502, April.
  9. Carmichael, F, 1992. "Multinational Enterprise and Strikes: Theory and Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 39(1), pages 52-68, February.
  10. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
  11. Aitken, B. & Hanson, G.H. & Harrison, A.E., 1994. "Spillovers, Foreign Investment and Export Behavior," Papers 95-06, Columbia - Graduate School of Business.
  12. Rosanne Altshuler & Harry Grubert & T. Scott Newlon, 1998. "Has U.S. Investment Abroad Become More Sensitive to Tax Rates?," NBER Working Papers 6383, National Bureau of Economic Research, Inc.
  13. Görg, Holger & Strobl, Eric, 2002. "Multinational Companies and Indigenous Development: An Empirical Analysis," CEPR Discussion Papers 3325, C.E.P.R. Discussion Papers.
  14. Keller, Wolfgang, 2000. "Do Trade Patterns and Technology Flows Affect Productivity Growth?," World Bank Economic Review, World Bank Group, vol. 14(1), pages 17-47, January.
  15. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  16. Girma, Sourafel & Görg, Holger, 2001. "Blessing or Curse? Domestic Plants' Survival and Employment Prospects After Foreign Acquisition," CEPR Discussion Papers 2994, C.E.P.R. Discussion Papers.
  17. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  18. Rachel Griffith & Helen Simpson, 2003. "Characteristics of Foreign-Owned Firms in British Manufacturing," NBER Working Papers 9573, National Bureau of Economic Research, Inc.
  19. Blomström, Magnus & Sjöholm, Fredrik, 1998. "Technology Transfer and Spillovers: Does Local Participation with Multinationals Matter?," Working Paper Series in Economics and Finance 268, Stockholm School of Economics.
  20. Görg, Holger & Strobl, Eric, 2002. "'Footloose' Multinationals?," CEPR Discussion Papers 3402, C.E.P.R. Discussion Papers.
  21. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 1998. "Corporate Ownership Around the World," NBER Working Papers 6625, National Bureau of Economic Research, Inc.
  22. Benfratello, Luigi & Sembenelli, Alessandro, 2006. "Foreign ownership and productivity: Is the direction of causality so obvious?," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 733-751, July.
  23. Lenn Gomes & Kannan Ramaswamy, 1999. "An Empirical Examination of the Form of the Relationship Between Multinationality and Performance," Journal of International Business Studies, Palgrave Macmillan, vol. 30(1), pages 173-187, March.
  24. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-77, July.
  25. Girma, Sourafel & Greenaway, David & Wakelin, Katharine, 2001. "Who Benefits from Foreign Direct Investment in the UK?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 119-33, May.
  26. Hubert, Florence & Pain, Nigel, 2001. "Inward Investment and Technical Progress in the United Kingdom Manufacturing Sector," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 134-47, May.
  27. Conyon, Martin J, et al, 2002. "The Productivity and Wage Effects of Foreign Acquisition in the United Kingdom," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 85-102, March.
  28. Harris, Richard D, 2002. "Foreign Ownership and Productivity in the United Kingdom--Some Issues When Using the ARD Establishment Level Data," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(3), pages 318-35, August.
  29. Michael Pfaffermayr, 1999. "Ownership Advantages, Foreign Production and Productivity: Evidence from Austrian Manufacturing Firms," Review of Industrial Organization, Springer, vol. 15(4), pages 379-396, December.
  30. Nigel Driffield & Max Munday, 1998. "The impact of foreign direct investment on UK manufacturing: is there a profit squeeze in domestic firms?," Applied Economics, Taylor & Francis Journals, vol. 30(5), pages 705-709.
  31. Jiatao Li & Stephen Guisinger, 1991. "Comparative Business Failures of Foreign-Controlled Firms in the United States," Journal of International Business Studies, Palgrave Macmillan, vol. 22(2), pages 209-224, June.
  32. Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
  33. Kumar, Nagesh, 1990. "Mobility Barriers and Profitability of Multinational and Local Enterprises in Indian Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 38(4), pages 449-63, June.
  34. Aitken, B. & Harrison, A. & Lipsey, R.E., 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States," Papers 95-21, Columbia - Graduate School of Business.
  35. Bruce A. Blonigen & Matthew J. Slaughter, 1999. "Foreign-Affiliate Activity and U.S. Skill Upgrading," NBER Working Papers 7040, National Bureau of Economic Research, Inc.
  36. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2002. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," NBER Working Papers 8724, National Bureau of Economic Research, Inc.
  37. Davies, Stephen W & Lyons, Bruce R, 1991. "Characterising Relative Performance: The Productivity Advantage of Foreign Owned Firms in the UK," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 584-95, October.
  38. Cousineau, J-M. & Lacroix, R. & Vachon, D., 1989. "Foreign Ownership And Strike Activity In Canada," Cahiers de recherche 8927, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  39. Freund, Caroline & Djankov, Simeon, 2000. "Which firms do foreigners buy : evidence from the Republic of Korea," Policy Research Working Paper Series 2450, The World Bank.
  40. Rachel Griffith, 1999. "Productivity and foreign ownership in the UK car industry," IFS Working Papers W99/11, Institute for Fiscal Studies.
  41. Conyon, Martin J. & Girma, Sourafel & Thompson, Steve & Wright, Peter W., 2002. "The impact of mergers and acquisitions on company employment in the United Kingdom," European Economic Review, Elsevier, vol. 46(1), pages 31-49, January.
  42. Nigel Driffield & Karl Taylor, 2002. "Spillovers from FDI and Skill Structures of Host-Country Firms," Discussion Papers in Economics 02/4, Department of Economics, University of Leicester.
  43. Baldwin, John R. & Harchaoui, Tarek, 2002. "Productivity Growth in Canada," Productivity Growth in Canada, Statistics Canada, Economic Analysis, number stcb6e, December.
  44. José Mata & Pedro Portugal, 2002. "Patterns of Entry, Post-Entry Growth and Survival: A Comparison Between Domestic and Foreign Owned Firms," Working Papers w200204, Banco de Portugal, Economics and Research Department.
  45. David Greenaway & Robert Hine & Peter Wright, 2000. "Further evidence on the effect of foreign competition on industry level wages," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(3), pages 522-538, 09.
  46. Robert H McGuckin & Sang V Nguyen, 2000. "The Impact of Ownership Changes: A View from Labor Markets," Working Papers 00-02, Center for Economic Studies, U.S. Census Bureau.
  47. Klaus Gugler, 1998. "Corporate Ownership Structure in Austria," Empirica, Springer, vol. 25(3), pages 285-307, January.
  48. Kamal Abd-el-Rahman, 1991. "Firms’ competitive and national comparative advantages as joint determinants of trade composition," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(1), pages 83-97, March.
  49. Mark E. Doms & J . Bradford Jensen, 1998. "Comparing Wages, Skills, and Productivity between Domestically and Foreign-Owned Manufacturing Establishments in the United States," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 235-258 National Bureau of Economic Research, Inc.
  50. Nigel Pain, 2002. "Financial Liberalisation, Alliance Capitalism and the Changing Structure of Financial Markets," NIESR Discussion Papers 143, National Institute of Economic and Social Research.
  51. Steven Globerman & John C. Ries & Ilan Vertinsky, 1994. "The Economic Performance of Foreign Affiliates in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 27(1), pages 143-56, February.
  52. Fosfuri, Andrea & Motta, Massimo, 1999. " Multinationals without Advantages," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 617-30, December.
  53. Zhou, Dongsheng & Li, Shaomin & Tse, David K., 2002. "The impact of FDI on the productivity of domestic firms: the case of China," International Business Review, Elsevier, vol. 11(4), pages 465-484, August.
  54. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-38, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wiw:wiwwuw:wuwp087. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Department of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.