IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Foreign ownership, firm performance, and the geography of civic capital

  • Bürker, Matthias
  • Franco, Chiara
  • Minerva, G. Alfredo

It is well established in the literature that foreign affiliates are subject to a series of governance and assimilation costs that may deteriorate their performance. This is particularly relevant for firms which have been recently acquired by foreign investors. We employ the variation in civic capital across Italian provinces as an exogenous determinant of these governance costs. We claim that the effect of foreign ownership on productivity is less favorable in areas where civic capital is low. As the level of local civic capital increases, the scope for opportunistic behavior is reduced, which makes the governance of foreign affiliates easier and improves their performance. We take this prediction to the data and find confirmation of our conceptual framework. Our analysis uncovers the importance of the geographic heterogeneity of informal norms and institutions in analyzing the nexus between foreign ownership and performance.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 43 (2013)
Issue (Month): 6 ()
Pages: 964-984

in new window

Handle: RePEc:eee:regeco:v:43:y:2013:i:6:p:964-984
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Antonio Ciccone & Robert E. Hall, 1995. "Productivity and the density of economic activity," Economics Working Papers 120, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
  3. Igor Filatotchev & Mike Wright, 2011. "Agency Perspectives on Corporate Governance of Multinational Enterprises," Journal of Management Studies, Wiley Blackwell, vol. 48(2), pages 471-486, 03.
  4. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2000. "The Role of Social Capital In Financial Development," CEPR Discussion Papers 2383, C.E.P.R. Discussion Papers.
  5. Guido Tabellini, 2005. "Culture and Institutions: Economic Development in the Regions of Europe," CESifo Working Paper Series 1492, CESifo Group Munich.
  6. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521677530, October.
  7. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May.
  8. Lucia Foster & John Haltiwanger & Chad Syverson, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," Working Papers 05-11, Center for Economic Studies, U.S. Census Bureau.
  9. Andrea Ichino & Giovanni Maggi, 1999. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," NBER Working Papers 7415, National Bureau of Economic Research, Inc.
  10. Ragnhild Balsvik & Stefanie A. Haller, 2010. "Picking "Lemons" or Picking "Cherries"? Domestic and Foreign Acquisitions in Norwegian Manufacturing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 361-387, 06.
  11. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2013. "Long-term Persistence," EIEF Working Papers Series 1323, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2013.
  12. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2008. "Social Capital as Good Culture," CEPR Discussion Papers 6657, C.E.P.R. Discussion Papers.
  13. Casaburi, Lorenzo & Minerva, G. Alfredo, 2011. "Production in advance versus production to order: The role of downstream spatial clustering and product differentiation," Journal of Urban Economics, Elsevier, vol. 70(1), pages 32-46, July.
  14. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  15. Yuriy Gorodnichenko & Gerard Roland, 2010. "Culture, Institutions and the Wealth of Nations," NBER Working Papers 16368, National Bureau of Economic Research, Inc.
  16. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2009. "The organization of firms across countries," NBER Working Papers 15129, National Bureau of Economic Research, Inc.
  17. Roberto, Basile, 2004. "Acquisition versus greenfield investment: the location of foreign manufacturers in Italy," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 3-25, January.
  18. Paolo Angelini & Andrea Generale, 2008. "On the Evolution of Firm Size Distributions," American Economic Review, American Economic Association, vol. 98(1), pages 426-38, March.
  19. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521860130, October.
  20. Rafael Rob & Peter Zemsky, . "Social Capital, Corporate Culture and Incentive Intensity," Penn CARESS Working Papers 7380c2f90d0b2f362ad71f139, Penn Economics Department.
  21. Miriam A. Golden & Lucio Picci, 2005. "Proposal For A New Measure Of Corruption, Illustrated With Italian Data," Economics and Politics, Wiley Blackwell, vol. 17, pages 37-75, 03.
  22. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  23. Yann Algan & Pierre Cahuc, 2010. "Inherited Trust and Growth," American Economic Review, American Economic Association, vol. 100(5), pages 2060-92, December.
  24. Benfratello, Luigi & Sembenelli, Alessandro, 2006. "Foreign ownership and productivity: Is the direction of causality so obvious?," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 733-751, July.
  25. A. Colin Cameron & Douglas L. Miller, 2010. "Robust Inference with Clustered Data," Working Papers 106, University of California, Davis, Department of Economics.
  26. Luc Laeven & Christopher Woodruff, 2007. "The Quality of the Legal System, Firm Ownership, and Firm Size," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 601-614, November.
  27. Spagnolo, Giancarlo, 1999. "Social relations and cooperation in organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 1-25, January.
  28. Matthias Arnold, Jens & Javorcik, Beata S., 2009. "Gifted kids or pushy parents? Foreign direct investment and plant productivity in Indonesia," Journal of International Economics, Elsevier, vol. 79(1), pages 42-53, September.
  29. Guido Tabellini, 2008. "The Scope of Cooperation: Values and Incentives," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 905-950, August.
  30. Conyon, Martin J, et al, 2002. "The Productivity and Wage Effects of Foreign Acquisition in the United Kingdom," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 85-102, March.
  31. Tomassen, Sverre & Benito, Gabriel R.G., 2009. "The costs of governance in international companies," International Business Review, Elsevier, vol. 18(3), pages 292-304, June.
  32. Ricardo A. López, 2009. "Do Firms Increase Productivity in Order to Become Exporters?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 621-642, October.
  33. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
  34. Yama Temouri & Nigel L. Driffield & Dolores Añón Higón, 2008. "Analysis of Productivity Differences among Foreign and Domestic Firms: Evidence from Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(1), pages 32-54, April.
  35. Yaakov Weber & Oded Shenkar & Adi Raveh, 1996. "National and Corporate Cultural Fit in Mergers/Acquisitions: An Exploratory Study," Management Science, INFORMS, vol. 42(8), pages 1215-1227, August.
  36. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  37. Bandick, Roger, 2010. "Foreign Acquisition, Wages and Productivity," Working Papers 10-21, University of Aarhus, Aarhus School of Business, Department of Economics.
  38. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  39. Griffith, Rachel, 1999. "Using the ARD Establishment Level Data to Look at Foreign Ownership and Productivity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 109(456), pages F416-42, June.
  40. Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
  41. Benfratello, Luigi & Schiantarelli, Fabio & Sembenelli, Alessandro, 2008. "Banks and innovation: Microeconometric evidence on Italian firms," Journal of Financial Economics, Elsevier, vol. 90(2), pages 197-217, November.
  42. Richard Harris & Catherine Robinson, 2003. "Foreign Ownership and Productivity in the United Kingdom Estimates for U.K. Manufacturing Using the ARD," Review of Industrial Organization, Springer, vol. 22(3), pages 207-223, May.
  43. Buckley, Peter J. & Carter, Martin J., 2002. "Process and structure in knowledge management practices of British and US multinational enterprises," Journal of International Management, Elsevier, vol. 8(1), pages 29-48.
  44. Li, Baibing & Martin, Elaine B. & Morris, A. Julian, 2002. "On principal component analysis in L1," Computational Statistics & Data Analysis, Elsevier, vol. 40(3), pages 471-474, September.
  45. Sergio Salis, 2008. "Foreign Acquisition and Firm Productivity: Evidence from Slovenia," The World Economy, Wiley Blackwell, vol. 31(8), pages 1030-1048, 08.
  46. Peter Buckley & Martin Carter, 1996. "The Economics of Business Process Design: Motivation, Information and Coordination Within the Firm," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 3(1), pages 5-24.
  47. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Alfred Marshall Lecture Social Capital as Good Culture," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 295-320, 04-05.
  48. Guido de Blasio & Giorgio Nuzzo, 2010. "Historical Traditions Of Civicness And Local Economic Development," Journal of Regional Science, Wiley Blackwell, vol. 50(4), pages 833-857.
  49. Peter J. Buckley & Roger Strange, 2011. "The Governance of the Multinational Enterprise: Insights from Internalization Theory," Journal of Management Studies, Wiley Blackwell, vol. 48(2), pages 460-470, 03.
  50. Yingqi Wei & Xiaming Liu & David Parker & Kirit Vaidya, 1999. "The Regional Distribution of Foreign Direct Investment in China," Regional Studies, Taylor & Francis Journals, vol. 33(9), pages 857-867.
  51. Peter J Buckley & Mark C Casson, 1998. "Analyzing Foreign Market Entry Strategies: Extending the Internalization Approach," Journal of International Business Studies, Palgrave Macmillan, vol. 29(3), pages 539-561, September.
  52. Du, Julan & Lu, Yi & Tao, Zhigang, 2008. "Economic institutions and FDI location choice: Evidence from US multinationals in China," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 412-429, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:43:y:2013:i:6:p:964-984. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.