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Innovation and Foreign Ownership

  • Guadalupe, Maria
  • Kuzmina, Olga
  • Thomas, Catherine

This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that jointly explains the observed selection process and the innovation decisions. Further, we show in the data that innovation on acquisition is associated with the increased market scale provided by the parent firm.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8141.

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Date of creation: Dec 2010
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Handle: RePEc:cpr:ceprdp:8141
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