IDEAS home Printed from https://ideas.repec.org/p/cme/wpaper/1612.html
   My bibliography  Save this paper

The impact of Inward FDI on host country labour markets. A counterfactual analysis on Italian manufacturing companies

Author

Listed:
  • Mariachiara Barzotto

    () (Birmingham Business School, University of Birmingham)

  • Giancarlo Corò

    () (Ca’ Foscari University Venice)

  • Ilaria Mariotti

    (DAStU – Polytechinic of Milan)

  • Marco Mutinelli

    () (University of Brescia)

Abstract

Countries are increasingly competing to attract inward foreign direct investments (FDIs) to benefit from the superior performance of the international firms. Yet there is still scant evidence about the effects of inward FDIs on the high-income countries’ industrial base. In advanced economies a specialised, skilled workforce has emerged as a pivotal economic development asset to enhance innovation capabilities. The paper aims at investigating how the use of a local, skilled workforce differs according to the firms’ ownership; being either affiliates of foreign multinationals (MNEs), or uni-national firms (firms that have neither been acquired in the period of analysis, nor have invested abroad; henceforth NATs). We empirically investigate this issue by adopting a novel database linking regional labour force characteristics with economic data on inward FDIs and NATs, operating in the manufacturing industry in the Veneto NUTS2 region (northeast of Italy) between 2007 and 2013. Descriptive statistics and counterfactual estimation have been developed, focusing on firms’ skill composition (e.g. skill level, age, gender and nationality). The results show that the two groups of firms differ in terms of workforce skill composition, and the affiliates of foreign MNEs positively impact on the regeneration of the host country’s human capital by attracting and employing a wider share of more highly skilled labour force.

Suggested Citation

  • Mariachiara Barzotto & Giancarlo Corò & Ilaria Mariotti & Marco Mutinelli, 2016. "The impact of Inward FDI on host country labour markets. A counterfactual analysis on Italian manufacturing companies," Working Papers 1612, c.MET-05 - Centro Interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.
  • Handle: RePEc:cme:wpaper:1612
    as

    Download full text from publisher

    File URL: http://193.205.129.80/repec/cme/wpaper/cmetwp_03_2016.pdf
    File Function: First version, 2016
    Download Restriction: no

    References listed on IDEAS

    as
    1. Ron Boschma, 2005. "Editorial: Role of Proximity in Interaction and Performance: Conceptual and Empirical Challenges," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 41-45.
    2. Castellani, Davide & Mariotti, Ilaria & Piscitello, Lucia, 2008. "The impact of outward investments on parent company's employment and skill composition: Evidence from the Italian case," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 81-94, March.
    3. Rosario Crinò & Fabrizio Onida, 2007. "Foreign Ownership and Economic Performance in Italy: Not all is Cherry-Picking!," KITeS Working Papers 207, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Nov 2007.
    4. Giuliani, Elisa & Gorgoni, Sara & Günther, Christina & Rabellotti, Roberta, 2014. "Emerging versus advanced country MNEs investing in Europe: A typology of subsidiary global–local connections," International Business Review, Elsevier, vol. 23(4), pages 680-691.
    5. Chiara Criscuolo & Ralf Martin, 2009. "Multinationals and U.S. Productivity Leadership: Evidence from Great Britain," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 263-281, May.
    6. O'Donnell, Sharon & Blumentritt, Timothy, 1999. "The contribution of foreign subsidiaries to host country national competitiveness," Journal of International Management, Elsevier, vol. 5(3), pages 187-206.
    7. Davide Castellani & Antonello Zanfei, 2007. "Multinational companies and productivity spillovers: is there a specification error?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1047-1051.
    8. Mara Grasseni, 2007. "Multinationals and firm heterogeneity: a non-parametric test," Working Papers (-2012) 0706, University of Bergamo, Department of Economics.
    9. Sjoerd Beugelsdijk & Philip McCann & Ram Mudambi, 2010. "Introduction: Place, space and organization-- economic geography and the multinational enterprise," Journal of Economic Geography, Oxford University Press, vol. 10(4), pages 485-493, July.
    10. Natália Barbosa & Helen Louri, 2005. "Corporate Performance: Does Ownership Matter? A Comparison of Foreign- and Domestic-Owned Firms in Greece and Portugal," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 27(1), pages 73-102, August.
    11. Stefano Menghinello & Lisa De Propris & Nigel Driffield, 2010. "Industrial districts, inward foreign investment and regional development," Journal of Economic Geography, Oxford University Press, vol. 10(4), pages 539-558, July.
    12. James A. Schmitz Jr., 2005. "What Determines Productivity? Lessons from the Dramatic Recovery of the U.S. and Canadian Iron Ore Industries Following Their Early 1980s Crisis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 582-625, June.
    13. Andre Torre & Alain Rallet, 2005. "Proximity and Localization," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 47-59.
    14. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-193, May.
    15. Crescenzi, Riccardo & Gagliardi, Luisa & Iammarino, Simona, 2015. "Foreign multinationals and domestic innovation: Intra-industry effects and firm heterogeneity," Research Policy, Elsevier, vol. 44(3), pages 596-609.
    16. Elia, Stefano & Mariotti, Ilaria & Piscitello, Lucia, 2009. "The impact of outward FDI on the home country's labour demand and skill composition," International Business Review, Elsevier, vol. 18(4), pages 357-372, August.
    17. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Direct Investments in Europe: Are Italian Regions Doomed?," Rivista di Politica Economica, SIPI Spa, vol. 95(1), pages 319-319, January-F.
    18. Buckley, Peter J. & Wang, Chengqi & Clegg, Jeremy, 2007. "The impact of foreign ownership, local ownership and industry characteristics on spillover benefits from foreign direct investment in China," International Business Review, Elsevier, vol. 16(2), pages 142-158, April.
    19. Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 31-72, February.
    20. Valeria Gattai, 2015. "Internationalisation and performance at the firm-level: what we learn from Italy," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(4), pages 475-509, December.
    21. Roberta Capello & Camilla Lenzi, 2015. "The Knowledge–Innovation Nexus. Its Spatially Differentiated Returns to Innovation," Growth and Change, Wiley Blackwell, vol. 46(3), pages 379-399, September.
    22. Sergio Mariotti & Marco Mutinelli & Lucia Piscitello, 2008. "The Internationalization of Production by Italian Industrial Districts' Firms: Structural and Behavioural Determinants," Regional Studies, Taylor & Francis Journals, vol. 42(5), pages 719-735.
    23. David Greenaway & Richard Kneller, 2007. "Firm heterogeneity, exporting and foreign direct investment," Economic Journal, Royal Economic Society, vol. 117(517), pages 134-161, February.
    24. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
    25. Koen de Backer, 2002. "Foreign ownership and productivity dynamics," Economics Working Papers 617, Department of Economics and Business, Universitat Pompeu Fabra.
    26. repec:ags:stataj:116022 is not listed on IDEAS
    27. Benfratello, Luigi & Sembenelli, Alessandro, 2006. "Foreign ownership and productivity: Is the direction of causality so obvious?," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 733-751, July.
    28. Becker, Sascha O. & Ichino, Andrea, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 0(Number 4), pages 1-20.
    29. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
    30. Hamida, Lamia Ben, 2013. "Are there regional spillovers from FDI in the Swiss manufacturing industry?," International Business Review, Elsevier, vol. 22(4), pages 754-769.
    31. David A. Riker & S. Lael Brainard, 1997. "U.S. Multinationals and Competition from Low Wage Countries," NBER Working Papers 5959, National Bureau of Economic Research, Inc.
    32. Sergio Mariotti & Marco Mutinelli & Lucia Piscitello, 2003. "Home country employment and foreign direct investment: evidence from the Italian case," Cambridge Journal of Economics, Oxford University Press, vol. 27(3), pages 419-431, May.
    33. Driffield, Nigel & Taylor, Karl, 2000. "FDI and the Labour Market: A Review of the Evidence and Policy Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 16(3), pages 90-103, Autumn.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Host Country; Labour Market; Advanced Economies; Skill Composition; Propensity Score; Manufacturing Industry; FDI;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cme:wpaper:1612. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Donato Iacobucci). General contact details of provider: http://edirc.repec.org/data/cmettit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.