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Foreign Acquisitions, Domestic Multinationals, and R&D


  • Bandick, Roger
  • Görg, Holger
  • Karpaty, Patrik


The aim of this paper is to evaluate the causal effect of foreign acquisition on R&D intensity in targeted domestic firms. We are able to distinguish domestic multinationals and non-multinationals, which allows us to investigate the fear that the change in ownership of domestic to foreign multinationals leads to a reduction in R&D activity in the country, as headquarter activities are relocated to the new owner’s home country. We use unique and rich firm level data for the Swedish manufacturing sector and different micro-econometric estimation strategies in order to control for the potential endogeneity of the acquisition dummy. Overall, our results give no support to the fears that foreign acquisition of domestic firms lead to a brain drain of R&D activity in Swedish MNEs. Rather, this paper finds robust evidence that foreign acquisitions lead to increasing R&D intensity in acquired domestic MNEs and non-MNEs.

Suggested Citation

  • Bandick, Roger & Görg, Holger & Karpaty, Patrik, 2010. "Foreign Acquisitions, Domestic Multinationals, and R&D," CEPR Discussion Papers 8081, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8081

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    References listed on IDEAS

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    6. James R. Markusen, 1998. "Multinational Firms, Location and Trade," The World Economy, Wiley Blackwell, vol. 21(6), pages 733-756, August.
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    8. Kristiina Huttunen, 2007. "The Effect of Foreign Acquisition on Employment and Wages: Evidence from Finnish Establishments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 497-509, August.
    9. Patrik Karpaty, 2006. "Does Multinationality Matter? Evidence from Swedish firm data," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(2), pages 101-122.
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    Cited by:

    1. Chen, Shiu-Sheng, 2017. "Exchange rate undervaluation and R&D activity," Journal of International Money and Finance, Elsevier, vol. 72(C), pages 148-160.
    2. Anders Gustafsson & Andreas Stephan & Alice Hallman & Nils Karlsson, 2016. "The “sugar rush” from innovation subsidies: a robust political economy perspective," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(4), pages 729-756, November.
    3. Patrik Karpaty & Patrik Gustavsson Tingvall, 2015. "Offshoring and Home Country R&D," The World Economy, Wiley Blackwell, vol. 38(4), pages 655-676, April.
    4. Castellani, Davide & Fassio, Claudio, 2016. "Import, Export and Multinationality. Evidence from Swedish Firms," Papers in Innovation Studies 2016/30, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    5. Apostolov Mico, 2016. "Foreign Direct Investments Induced Innovation? A Case Study − Macedonia," Comparative Economic Research, De Gruyter Open, vol. 19(1), pages 5-25, March.
    6. Wagner, Joachim, 2011. "Productivity and International Firm Activities: What Do We Know?," IZA Policy Papers 23, Institute for the Study of Labor (IZA).
    7. Ashraf, Ayesha & Herzer, Dierk & Nunnenkamp, Peter, 2014. "The effects of Greenfield FDI and cross-border M&As on total factor productivity," Kiel Working Papers 1941, Kiel Institute for the World Economy (IfW).
    8. Stiebale, Joel, 2016. "Cross-border M&As and innovative activity of acquiring and target firms," Journal of International Economics, Elsevier, vol. 99(C), pages 1-15.
    9. 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.
    10. 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.
    11. repec:bis:bisifc:45-16 is not listed on IDEAS
    12. repec:bla:worlde:v:39:y:2016:i:11:p:1728-1755 is not listed on IDEAS
    13. Stiebale, Joel & Vencappa, Dev, 2016. "Acquisitions, markups, efficiency, and product quality: Evidence from India," DICE Discussion Papers 229, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    14. Girma, Sourafel & Gong, Yundan & Görg, Holger & Lancheros, Sandra, 2015. "Investment liberalisation, technology take-off and export markets entry: Does foreign ownership structure matter?," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 254-269.
    15. Sara Amoroso & Bettina Mueller, 2017. "The short-run effects of Knowledge intensive greenfield FDI on new domestic entry," JRC Working Papers on Corporate R&D and Innovation 2017-02, Joint Research Centre (Seville site).
    16. María García-Vega & Patricia Hofmann & Richard Kneller, "undated". "The Internationalisation of R&D and the Knowledge Production Function," Discussion Papers 12/02, University of Nottingham, GEP.
    17. Castellani, Davide & Fassio, Claudio, 2017. "Export innovation: The role of new imported inputs and multinationality," Papers in Innovation Studies 2017/16, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    18. María García-Vega & Patricia Hofmann & Richard Kneller, 2015. "Multinationals and the Globalization of R&D," Discussion Papers 2015-18, University of Nottingham, GEP.
    19. repec:kap:sbusec:v:49:y:2017:i:1:d:10.1007_s11187-016-9815-9 is not listed on IDEAS
    20. Gabor Hunya, 2012. "The Role of Multinational Companies in International Business Integration," wiiw Research Reports 384, The Vienna Institute for International Economic Studies, wiiw.
    21. Kent Eliasson & Pär Hansson & Markus Lindvert, 2017. "Effects of foreign acquisitions on R&D and high-skill activities," Small Business Economics, Springer, vol. 49(1), pages 163-187, June.
    22. Commission of Experts for Research and Innovation (EFI), Berlin (ed.), 2012. "Research, innovation and technological performance in Germany - EFI Report 2012," Research, Innovation and Technological Performance in Germany: Report, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin, volume 127, number 2012e, April.
    23. Chiara Bentivogli & Litterio Mirenda, 2016. "Foreign ownership and performance: evidence from a panel of Italian firms," Temi di discussione (Economic working papers) 1085, Bank of Italy, Economic Research and International Relations Area.

    More about this item


    domestic multinationals; foreign acquisition; R&D;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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