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Does the Same FDI Fit All? How Competition and Affiliates Characteristics Affect Parents’ Productivity

Author

Listed:
  • Giorgia Giovannetti

    (Universitá di Firenze
    Fondazione Manlio Masi
    European University Institute)

  • Enrico Marvasi

    (Universitá di Firenze
    Politecnico di Milano)

  • Giorgio Ricchiuti

    () (Universitá di Firenze
    Università Cattolica del Sacro Cuore)

Abstract

This paper investigates the heterogeneity within the group of foreign direct investors by analyzing the relation between parents’ productivity, the degree of domestic competition and the characteristics of their affiliates. Our results show that there is no unique recipe. Foreign direct investors may benefit differently depending on the economic environment in which they operate. Building an original 10-year panel dataset of Italian investors, we find that larger manufacturing parents tend to have more, larger and more productive affiliates in a higher number of destinations as well as being more productive in terms of total factor productivity. Having affiliates in high income countries or in both high and low income countries is associated with a productivity premium vis-à-vis investors in low income countries. Parent sector characteristics such as technology and degree of competition are also associated with productivity in a non-monotonic way. Low income country investors are found to be relatively more productive when operating in more competitive low technology sectors, while the opposite holds true for high income country investors, which become more productive when operating in less competitive high technology sectors.

Suggested Citation

  • 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.
  • Handle: RePEc:spr:italej:v:5:y:2019:i:3:d:10.1007_s40797-019-00103-1
    DOI: 10.1007/s40797-019-00103-1
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    References listed on IDEAS

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    Keywords

    Foreign direct investment; Heterogeneous firms; Total factor productivity; Multinationals; Affiliates;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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