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Going multinational: What are the effects on home market performance?

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  • Jäckle, Robert

Abstract

A number of recent studies nd evidence for the existence of a persistent performance gap between multinational enterprises (MNE) and their domestic competitors. Therefore, the question arises whether successful rms become MNEs or whether going abroad improves home market performance. This paper investigates to what extent MNEs have superior performance characteristics, both prior to and after they have switched from national to multinational activities. In the rst case results are quite clear: Future multinationals outperform domestic rms. Since self-selection occurs, an endogenous treatment approach is necessary for comparing ex-post performance of rms. Using probit estimates of the decision to become a MNE, Heckman's (1978) treatment model is applied to account for potential endogeneity issues. The results suggest that after switching, both productivity and wage growth are higher for newly founded MNEs than for national rms. Employment growth is superior before switching but does not exhibit signi cantly higher ex-post growth rates. Moreover, capital intensities at multinationals evolve towards the use of capital. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2006,03.

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Date of creation: 2006
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Handle: RePEc:zbw:bubdp1:4240

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Keywords: Multinational enterprises; productivity; endogenous treatment;

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References

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  1. Sascha O. Becker & Karolina Ekholm & Robert Jaeckle & Marc-Andreas Muendler, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," CESifo Working Paper Series 1374, CESifo Group Munich.
  2. Koetter, Michael & Bos, Jaap W. B. & Heid, Frank & Kool, Clemens J. M. & Kolari, James W. & Porath, Daniel, 2005. "Accounting for distress in bank mergers," Discussion Paper Series 2: Banking and Financial Studies 2005,09, Deutsche Bundesbank, Research Centre.
  3. Muendler, Marc-Andreas, 2006. "Margins of Multinational Labor Substitution," University of California at San Diego, Economics Working Paper Series qt6b2236xm, Department of Economics, UC San Diego.
  4. Giorgio Barba Navaretti & Davide Castellani, 2003. "Investments Abroad and Performance at Home Evidence from Italian Multinationals," Development Working Papers 180, Centro Studi Luca d\'Agliano, University of Milano.
  5. Slacalek, Jirka & Fritsche, Ulrich & Dovern, Jonas & Döpke, Jörg, 2005. "European inflation expectations dynamics," Discussion Paper Series 1: Economic Studies 2005,37, Deutsche Bundesbank, Research Centre.
  6. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  7. Chiara Criscuolo & Ralf Martin, 2004. "Multinationals and U.S. Productivity Leadership: Evidence from Great Britain," OECD Science, Technology and Industry Working Papers 2004/5, OECD Publishing.
  8. Marin, Dalia, 2004. "A Nation of Poets and Thinkers - Less so with Eastern Enlargement? Austria and Germany," CEPR Discussion Papers 4358, C.E.P.R. Discussion Papers.
  9. Jens Matthias Arnold & Katrin Hussinger, 2003. "Export Behavior and Firm productivity in German Manufacturing. A Firm-Level Analysis," Development Working Papers 184, Centro Studi Luca d\'Agliano, University of Milano.
  10. John Y. Campbell & Jens Hilscher & Jan Szilagyi, 2008. "In Search of Distress Risk," Journal of Finance, American Finance Association, vol. 63(6), pages 2899-2939, December.
  11. Falko Fecht & Kevin X. D. Huang & Antoine Martin, 2004. "Financial intermediaries, markets, and growth," Working Papers 04-24, Federal Reserve Bank of Philadelphia.
  12. Sascha O. Becker & Robert Jäckle & Marc-Andreas Mündler, 2005. "Kehren deutsche Firmen ihrer Heimat den Rücken? - Ausländische Direktinvestitionen deutscher Unternehmen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 58(01), pages 23-33, 01.
  13. Sourafel Girma & Richard Kneller & Mauro Pisu, 2005. "Exports versus FDI: An Empirical Test," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(2), pages 193-218, July.
  14. von Kalckreuth, Ulf, 2005. "A "wreckers theory" of financial distress," Discussion Paper Series 1: Economic Studies 2005,40, Deutsche Bundesbank, Research Centre.
  15. Muendler, Marc-Andreas & Becker, Sascha O., 2007. "The effect of FDI on job separation," Discussion Paper Series 1: Economic Studies 2007,01, Deutsche Bundesbank, Research Centre.
  16. 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.
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Citations

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Cited by:
  1. Marc-Andreas Muendler & Sascha O. Becker, 2006. "Margins of Multinational Labor Substitution," CESifo Working Paper Series 1713, CESifo Group Munich.
  2. Johannes Becker & Nadine Riedel, 2008. "Cross-Border Tax Effects on Affiliate Investment - Evidence from European Multinationals," Working Papers 0816, Oxford University Centre for Business Taxation.
  3. John P. Weche Geluebcke, 2012. "Foreign and Domestic Takeovers in Germany: Cherry-picking and Lemon-grabbing," Working Paper Series in Economics 240, University of Lüneburg, Institute of Economics.
  4. Sascha O. Becker & Marc-Andreas Muendler, 2006. "The Effect of FDI on Job Separation," CESifo Working Paper Series 1864, CESifo Group Munich.
  5. Joel Stiebale & Michaela Trax, 2010. "The Eff ects of Cross-border M&As on the Acquirers’ Domestic Performance – Firm-level Evidence," Ruhr Economic Papers 0159, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  6. Wen-Chung Hsu & Xingbo Gao & Jianhua Zhang & Hsin Mei Lin, 2011. "The effects of outward FDI on home-country productivity: Do location of investment and market orientation matter?," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 4(2), pages 99-116, June.
  7. Michaela Trax, 2011. "Productivity and the Internationalization of Firms – Cross-border Acquisitions versus Greenfield Investments," Ruhr Economic Papers 0259, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  8. Dirk Engel & Vivien Procher, 2010. "Home Firm Performance after Foreign Investments and Divestitures," Ruhr Economic Papers 0193, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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