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Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance

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  • Laura Alfaro
  • Maggie Xiaoyang Chen

Abstract

We examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that, first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in noncrisis years. (JEL F23, G01, L22, M16)

Suggested Citation

  • Laura Alfaro & Maggie Xiaoyang Chen, 2012. "Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 30-55, August.
    • Handle: RePEc:aea:aejpol:v:4:y:2012:i:3:p:30-55
    Note: DOI: 10.1257/pol.4.3.30
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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G01 - Financial Economics - - General - - - Financial Crises
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration

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