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Effects of Foreign Ownership on Innovation Activities. Empirical Evidence for 12 European Countries

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  • Martin Falk

    (WIFO)

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 12 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 countries. However, results from the Blinder-Oaxaca decomposition of the differences in the percentage of innovating firms between foreign-owned and domestic firms reveal that the differences are mainly due to different firm characteristics rather than 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 countries, 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 12 European Countries," WIFO Studies, WIFO, number 34234, January.
    • Handle: RePEc:wfo:wstudy:34234
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    Cited by:

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    2. Fagerberg, Jan & Srholec, Martin & Verspagen, Bart, 2010. "Innovation and Economic Development," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 833-872, Elsevier.
    3. Choi, Suk Bong & Lee, Soo Hee & Williams, Christopher, 2011. "Ownership and firm innovation in a transition economy: Evidence from China," Research Policy, Elsevier, vol. 40(3), pages 441-452, April.
    4. Jaan Masso & Tõnu Roolaht & Urmas Varblane, 2010. "Foreign Direct Investment And Innovation In Central And Eastern Europe: Evidence From Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 67, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    5. Amy Kahn & Atoko Kasongo & Moses M. Sithole & Kgabo Hector Ramoroka, 2024. "An analysis of the micro- and macro-economic determinants of firm R&D intensity in the South African business sector," African Journal of Science, Technology, Innovation and Development, Taylor & Francis Journals, vol. 16(3), pages 297-308, April.
    6. Pascal L. Ghazalian & Ali Fakih, 2017. "R&D and Innovation in Food Processing Firms in Transition Countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(2), pages 427-450, June.
    7. Aradhna Aggarwal, 2018. "The Impact of Foreign Ownership on Research and Development Intensity and Technology Acquisition in Indian Industries: Pre and Post Global Financial Crisis," Asian Development Review, MIT Press, vol. 35(1), pages 1-26, March.
    8. Kiss, János, 2022. "Innovatívabbak-e a termelékeny és az exportáló vállalatok? Egy magyar feldolgozóipari minta elemzése [Are productive and exporting companies more innovative? Analysis of a sample of Hungarian mediu," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 502-516.
    9. Rahmouni, Mohieddine & Ayadi, Mohamed & YIldIzoglu, Murat, 2010. "Characteristics of innovating firms in Tunisia: The essential role of external knowledge sources," Structural Change and Economic Dynamics, Elsevier, vol. 21(3), pages 181-196, August.
    10. Özen, Şükrü & Sorkun, Metehan Feridun & Önder, Çetin, 2024. "How global and national institutions interactively shape firms’ commitment to innovation regimes in latecomer countries," International Business Review, Elsevier, vol. 33(5).
    11. Spencer, Andrew J. & Buhalis, Dimitrios & Moital, Miguel, 2012. "A hierarchical model of technology adoption for small owner-managed travel firms: An organizational decision-making and leadership perspective," Tourism Management, Elsevier, vol. 33(5), pages 1195-1208.

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    More about this item

    Keywords

    FIW Innovation;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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