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Firms’ technological trajectories and the creation of foreign subsidiaries

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Author Info
Davide Castellani (ISE-Università di Urbino)

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Abstract

Multinational firms are traditionally considered as firms possessing some technological lead and exploiting this proprietary advantage in international markets, but a growing literature has been arguing that multinational firms set up foreign subsidiaries not only as a means to exploit their own technology but also to enrich it. This paper provides some empirical evidence in this line of analysis. The aim of the paper is to assess the effects of the creation of foreign subsidiaries on firm’s technological trajectory. The idea is that by setting up subsidiaries in foreign countries multinational firms can achieve some form of reverse technology transfer which can be expected to affect their technological trajectory. The empirical investigation has been carried out using data from 1992 to 1996 on a sample of 1,814 Italian manufacturing firms. Results support the view that the creation of manufacturing subsidiaries have a positive impact on firm’s productivity trajectory and, more interestingly, this positive impact is greater when subsidiaries are created in regions where knowledge spillovers are expected to be relatively higher, such as the U.S

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Paper provided by EconWPA in its series International Trade with number 0108003.

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Date of creation: 27 Aug 2001
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Handle: RePEc:wpa:wuwpit:0108003

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Related research
Keywords: foreign direct investments; total factor productivity; dynamic panel data;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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References listed on IDEAS
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  1. Davide Castellani, 2002. "Export behavior and productivity growth: Evidence from Italian manufacturing firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(4), pages 605-628, December. [Downloadable!] (restricted)
  2. Barba Navaretti, Giorgio & Castellani, Davide, 2004. "Investments Abroad and Performance at Home: Evidence from Italian Multinationals," CEPR Discussion Papers 4284, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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