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Foreign direct investment productivity premium and foreign affiliates' heterogeneity: A comparison between advanced and emerging market overseas investments in the EU

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  • Rosanna Pittiglio
  • Filippo Reganati

Abstract

This paper aims to investigate the existence of productivity heterogeneity among foreign‐owned firms (FOFs) based in the European Union (EU). Using firm‐level data for a sample of FOFs investing in the EU over the period 2006–14, we find that foreign affiliates from advanced countries (AFOFs) show a positive productivity gap compared to foreign affiliates from emerging countries (EFOFs). However, when we consider the type and the motivation of foreign direct investment, our results reveal that, while AFOFs always seem to be more productive than EFOFs in manufacturing sectors, EFOFs appear to enjoy a productivity premium compared to AFOFs in the services, when their activity occurs in the same industry as their parent and they operate in less knowledge‐intensive market sectors.

Suggested Citation

  • Rosanna Pittiglio & Filippo Reganati, 2019. "Foreign direct investment productivity premium and foreign affiliates' heterogeneity: A comparison between advanced and emerging market overseas investments in the EU," The World Economy, Wiley Blackwell, vol. 42(10), pages 3030-3064, October.
    • Handle: RePEc:bla:worlde:v:42:y:2019:i:10:p:3030-3064
    DOI: 10.1111/twec.12837
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    Cited by:

    1. Wildmer Daniel Gregori & Maria Martinez Cillero & Michela Nardo, 2022. "The effects of cross-border acquisitions on firms’ productivity in the EU," Working Papers 2022.10, International Network for Economic Research - INFER.
    2. repec:gdk:wpaper:69 is not listed on IDEAS
    3. Cui, Lin & Gao, Qiuling & Guo, Jinyu & Ma, Pengcheng, 2022. "OFDI performance of EMNEs: A review and recommendations for future research," Journal of International Management, Elsevier, vol. 28(3).
    4. Gregori, Wildmer Daniel & Martinez Cillero, Maria & Nardo, Michela, 2021. "The effects of cross-border acquisitions on firms' productivity in the EU," Working Papers 2021-06, Joint Research Centre, European Commission.

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