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Not Every Kind of Outward FDI Increases Parent Firm Performance: The Case of New EU Member States

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  • Jože Damijan
  • Črt Kostevc
  • Matija Rojec

Abstract

Using a large firm-level dataset we investigate what kind of firms from new EU member states from Central and Eastern Europe (CEECs) tend to invest abroad (testing of self-selection hypothesis), and what is the impact of outward FDI on their productivity (testing of learning-by-investing hypothesis). We find that the best firms tend to self-select into outward FDI. There is also a positive effect of outward FDI on productivity growth of investing firms from CEECs, the strongest being in the case of Estonia, Romania, Czech Republic, and Slovakia. The positive impact of becoming a first-time foreign investor is relatively long lasting, but comes into effect only in investments in Western European or other CEECs and in the case of manufacturing subsidiaries.

Suggested Citation

  • Jože Damijan & Črt Kostevc & Matija Rojec, 2017. "Not Every Kind of Outward FDI Increases Parent Firm Performance: The Case of New EU Member States," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(1), pages 74-97, January.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:1:p:74-97
    DOI: 10.1080/1540496X.2016.1149059
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    Cited by:

    1. Jiazhen Ren & Apurbo Sarkar & Hong Li & Xiaojing Li, 2022. "Does the Host Country’s Foreign Direct Investment (FDI) Restrictiveness Inhibit the Export Sophistication of the Home Country? Evidence from China’s Manufacturing Data," Sustainability, MDPI, vol. 14(22), pages 1-20, November.
    2. Iwasaki, Ichiro & Kočenda, Evžen, 2017. "Are some owners better than others in Czech privatized firms? Even meta-analysis can’t make us perfectly sure," Economic Systems, Elsevier, vol. 41(4), pages 537-568.
    3. Mainer-Casado, Carolina & Fariñas, José Carlos & Moreno, Lourdes, 2018. "The Scope, Scale and Locational Preferences of Spanish Multinationals," MPRA Paper 85766, University Library of Munich, Germany.
    4. Fariñas, José C. & Martín-Marcos, Ana & Velázquez, Francisco J., 2019. "Estimating the Scope Elasticity of Multinational Firms: An Empirical Assessment," MPRA Paper 94990, University Library of Munich, Germany.
    5. Mumtaz Hussain Shah, 2017. "Inward FDI in East Asian & Pacific Developing Countries due to WTO Led Liberalisation," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(2), pages 1-20, June.
    6. Prajukta Tripathy & Pragyanrani Behera & Bikash Ranjan Mishra, 2023. "Study of linkages between productivity, export, and outward foreign direct investment: An empirical perspective of Indian manufacturing industries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1527-1548, April.
    7. Kuusi, Tero & Ali-Yrkkö, Jyrki, 2021. "BITs with a Bite? EU Home Investment Effects of EU-China Bilateral Investment Treaties," ETLA Reports 115, The Research Institute of the Finnish Economy.
    8. Giorgia Giovannetti & Enrico Marvasi & Giorgio Ricchiuti, 2019. "Does the Same FDI Fit All? How Competition and Affiliates Characteristics Affect Parents’ Productivity," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 5(3), pages 369-402, October.

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