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Innovation and Foreign Ownership

Author Info

Listed author(s):
  • Maria Guadalupe
  • Olga Kuzmina
  • Catherine Thomas

Abstract

This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that explains both the observed selection patterns and the innovation decisions. Further, we show in the data that innovation upon acquisition is associated with the increased market scale provided by the parent firm.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3594
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 7 (December)
Pages: 3594-3627

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:7:p:3594-3627
Note: DOI: 10.1257/aer.102.7.3594
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Find related papers by JEL classification:
  • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
  • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
  • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
  • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
  • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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