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Effects of Foreign Ownership On Innovation Activities: Empirical Evidence for Twelve European Countries

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  • Martin Falk

    (WIFO, Arsenal Objekt 20, A-1030 Vienna, Martin.Falk@wifo.ac.at)

Abstract

In the present study we investigate the relationship between foreign ownership and innovation activities using the firm-level data of the third Community Innovation Survey (CIS) covering twelve European countries. Probit estimates based on 28,000 firms' observations show that foreign-owned firms are more innovative than domestic firms, particularly in the New EU Member States. However, results from the Blinder-Oaxaca decomposition of the differences in the percentage of innovating firms between foreign-owned and domestic firms reveals that the differences are mainly due to the different firm characteristics rather than the differences in coefficients. In particular, the dominance of foreign-owned firms in the largest firm size group is the main factor contributing to the gap in the percentage of innovators between foreign-owned firms and domestic firms. Furthermore, using the fractional logit model, we find that in the New EU Member states, foreign ownership has a positive and significant impact on the share of market novelties as well as on the share of new products in turnover. In this case, the results from the Blinder-Oaxaca decomposition analysis indicate that the ownership difference in the share of innovative sales is not due to the differences in the observed firms' characteristics.

Suggested Citation

  • Martin Falk, 2008. "Effects of Foreign Ownership On Innovation Activities: Empirical Evidence for Twelve European Countries," National Institute Economic Review, National Institute of Economic and Social Research, vol. 204(1), pages 85-97, April.
  • Handle: RePEc:sae:niesru:v:204:y:2008:i:1:p:85-97
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    Cited by:

    1. Richard Harris & John Moffat, 2011. "R&D, Innovation and Exporting," SERC Discussion Papers 0073, Spatial Economics Research Centre, LSE.
    2. Fagerberg, Jan & Srholec, Martin & Verspagen, Bart, 2010. "Innovation and Economic Development," Handbook of the Economics of Innovation, Elsevier.
    3. repec:bla:jageco:v:68:y:2017:i:2:p:427-450 is not listed on IDEAS
    4. repec:eee:touman:v:33:y:2012:i:5:p:1195-1208 is not listed on IDEAS

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