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Productivity Effects of Foreign Acquisitions in Swedish Manufacturing: The FDI Productivity Issue Revisited

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  • Patrik Karpaty

Abstract

This study analyzes the difference between foreign and domestic ownership of firms with respect to productivity. Recent literature has shown that it is important to study the counter-factual outcome, i.e. what would the outcome be had the domestic firm never been acquired? The analysis is based on a panel of Swedish firm level data. In order to isolate the casual effects due to a takeover a propensity score matching estimator is applied to compare similar treated and untreated firms. The difference-in-difference estimations show that there is a positive effect of foreign acquisition on productivity. Foreign acquisitions increase the productivity in the acquired Swedish firms by between 3 and 11% depending on the estimator chosen. Moreover, this productivity difference does not occur immediately but starts between 1-5 years post acquisition.

Suggested Citation

  • Patrik Karpaty, 2007. "Productivity Effects of Foreign Acquisitions in Swedish Manufacturing: The FDI Productivity Issue Revisited," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(2), pages 241-260.
  • Handle: RePEc:taf:ijecbs:v:14:y:2007:i:2:p:241-260
    DOI: 10.1080/13571510701344038
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    References listed on IDEAS

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    1. Norbäck, Pehr-Johan & Persson, Lars, 2001. "Investment Liberalization - Who Benefits from Cross-Border Mergers & Acquisitions?," Working Paper Series 569, Research Institute of Industrial Economics.
    2. Olivier Bertrand & Habib Zitouna, 2008. "Domestic versus cross-border acquisitions: which impact on the target firms' performance?," Applied Economics, Taylor & Francis Journals, vol. 40(17), pages 2221-2238.
    3. James Heckman & Salvador Navarro-Lozano, 2004. "Using Matching, Instrumental Variables, and Control Functions to Estimate Economic Choice Models," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 30-57, February.
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    Citations

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    Cited by:

    1. John P. Weche Geluebcke, 2012. "Foreign and Domestic Takeovers in Germany: First Comparative Evidence on the Post-acquisition Target Performance using new Data," Working Paper Series in Economics 249, University of Lüneburg, Institute of Economics.
    2. Adriana Peluffo, 2015. "Foreign Direct Investment, Productivity, Demand for Skilled Labour and Wage Inequality: An Analysis of Uruguay," The World Economy, Wiley Blackwell, vol. 38(6), pages 962-983, June.
    3. Wagner, Joachim, 2011. "Productivity and International Firm Activities: What Do We Know?," IZA Policy Papers 23, Institute for the Study of Labor (IZA).
    4. Roger Bandick & Patrik Karpaty, "undated". "Foreign Acquisition and Employment Effects in Swedish Manufacturing," Discussion Papers 07/35, University of Nottingham, GEP.
    5. Siedschlag Iulia & Kaitila Ville & McQuinn John & Zhang Xiaoheng, 2014. "International Investment and Firm Performance: Empirical Evidence from Small Open Economies," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(6), pages 662-687, December.
    6. Kokko Ari & Söderlund Bengt & Tingvall Patrik Gustavsson, 2014. "Redirecting International Trade: Contracts, Conflicts, and Institutions," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(6), pages 688-721, December.
    7. Jude, Cristina, 2012. "FDI, Productivity and Wages. New Evidence from a Romanian Matched Sample," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 36-55, December.
    8. John P. Weche Gelübcke, 2013. "Foreign and Domestic Takeovers in Germany: Cherry-picking and Lemon-grabbing," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 59(4), pages 275-294.
    9. James Foreman-Peck & Tom Nicholls, 2013. "SME takeovers as a contributor to regional productivity gaps," Small Business Economics, Springer, vol. 41(2), pages 359-378, August.
    10. Tayem Ghada, 2015. "Does Foreign Ownership Increase Firms’ Productivity? Evidence from Firms Listed on Amman Stock Exchange," Review of Middle East Economics and Finance, De Gruyter, vol. 11(1), pages 25-54, April.
    11. repec:eee:iburev:v:26:y:2017:i:6:p:1124-1140 is not listed on IDEAS
    12. Andersson, Martin & Xiao, Jing, 2016. "Acquisitions of start-ups by incumbent businesses," Research Policy, Elsevier, vol. 45(1), pages 272-290.
    13. Liu, Qing & Lu, Ruosi & Zhang, Chao, 2015. "The labor market effect of foreign acquisitions: Evidence from Chinese manufacturing firms," China Economic Review, Elsevier, vol. 32(C), pages 110-120.
    14. Anca-Simona HROMEI, 2013. "Reasons For Mergers And Their Impact On Companies," SEA - Practical Application of Science, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 1, pages 82-88, June.
    15. Andersson, Martin & Xiao, Jing, 2014. "Acquisitions of Start-ups by Incumbent Businesses A market selection process of “high-quality” entrants?," Papers in Innovation Studies 2014/19, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    16. 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, June.
    17. Schiffbauer, Marc & Siedschlag, Iulia & Ruane, Frances, 2017. "Do foreign mergers and acquisitions boost firm productivity?," International Business Review, Elsevier, vol. 26(6), pages 1124-1140.
    18. Joze P. Damijan & Crt Kostevc & Matija Rojec, 2012. "Growing lemons and cherries? Pre- and post-acquisition performance of foreign-acquired firms in new EU member states," LICOS Discussion Papers 31812, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    19. repec:bla:worlde:v:40:y:2017:i:1:p:2-20 is not listed on IDEAS
    20. Azdejković Dragan & Marković Dušan, 2016. "The Impact Of Cross-Border Acquisitions In Serbia On Productivity, Wages, And Employment," Economic Annals, Faculty of Economics, University of Belgrade, vol. 61(211), pages 47-68, October -.
    21. repec:cmj:journl:y:2013:i:27:hromeias is not listed on IDEAS
    22. Bandick, Roger & Karpaty, Patrik, 2011. "Employment effects of foreign acquisition," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 211-224, April.

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