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Home Country Effects of Investing Abroad: Evidence from Quantile Regressions

Author

Listed:
  • Anna Maria Falzoni

    (CESPRI, Università Bocconi, Milano and University of Bergamo, Italy)

  • Mara Grasseni

    (University of Bergamo, Italy)

Abstract

Home country effects of domestic firms investing abroad have been a highly debated issue. Overall, the results of a number of empirical studies seem not to support the fear that MNEs are exporting domestic production and/or jobs; however the issue should be examined more deeply. In particular, following the recent theoretical and empirical literature on firm heterogeneity, an important point that should be investigated is whether the impact of outward FDI on the performance of parent firms might differ according to their level of productivity or their size. Using quantile regressions and a data set for Italian firms investing abroad, this paper shows that the impact of international expansion on parents’ performance (measured in terms of total factor productivity, labour productivity and employment) varies across firms in different quantiles of the performance distribution and across foreign affiliates’ geographical locations. In particular, quantile regressions seem to show that firms throughout the productivity distribution do not benefit from FDI in Less Developed Countries. Differently, parent firms in the upper quantiles of productivity seem to be positively affected by foreign expansion in Developed Countries. As for employment, only small firms seem to be negatively influenced by outward FDI. Finally, measures of multinational experience influence positively and significantly parent firms across quantiles of productivity and employment.

Suggested Citation

  • Anna Maria Falzoni & Mara Grasseni, 2005. "Home Country Effects of Investing Abroad: Evidence from Quantile Regressions," KITeS Working Papers 170, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jun 2005.
  • Handle: RePEc:cri:cespri:wp170
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    References listed on IDEAS

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    1. Bruno Van Pottelsberghe De La Potterie & Frank Lichtenberg, 2001. "Does Foreign Direct Investment Transfer Technology Across Borders?," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 490-497, August.
    2. Mata, Jose & Machado, Jose A. F., 1996. "Firm start-up size: A conditional quantile approach," European Economic Review, Elsevier, vol. 40(6), pages 1305-1323, June.
    3. Giorgio Barba Navaretti & Davide Castellani, 2003. "Investments Abroad and Performance at Home Evidence from Italian Multinationals," Development Working Papers 180, Centro Studi Luca d'Agliano, University of Milano.
    4. Sourafel Girma, & Holger Görg, 2003. "Foreign direct investmant, spillovers and absorptive capacity: Evidence from quantile regressions," The Institute for International Integration Studies Discussion Paper Series iiisdp01, IIIS.
    5. Wolfgang Keller & Stephen R. Yeaple, 2009. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 821-831, November.
    6. Markusen, James R & Maskus, Keith E, 2002. "Discriminating among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
    7. Hartmut Egger & Peter Egger, 2006. "International Outsourcing and the Productivity of Low-Skilled Labor in the EU," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 98-108, January.
    8. Head, Keith & Ries, John, 2003. "Heterogeneity and the FDI versus export decision of Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 448-467, December.
    9. Robert E. Lipsey, 1999. "Foreign Production by U.S. Firms and Parent Firm Employment," NBER Working Papers 7357, National Bureau of Economic Research, Inc.
    10. Henrik Braconier & Karolina Ekholm & Karen Knarvik, 2001. "In search of FDI-transmitted R&D spillovers: A study based on Swedish data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(4), pages 644-665, December.
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    Citations

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    Cited by:

    1. Kokko, Ari, 2006. "The Home Country Effects Of Fdi In Developed Economies," EIJS Working Paper Series 225, Stockholm School of Economics, The European Institute of Japanese Studies.
    2. Maria Rosaria Ferrante & Marzia Freo, 2012. "The Total Factor Productivity Gap between Internationalised and Domestic Firms: Net Premium or Heterogeneity Effect?," The World Economy, Wiley Blackwell, vol. 35(9), pages 1186-1214, September.
    3. Joachim Wagner, 2011. "From Estimation Results to Stylized Facts Twelve Recommendations for Empirical Research in International Activities of Heterogeneous Firms," De Economist, Springer, vol. 159(4), pages 389-412, December.
    4. Cesare Imbriani & Rosanna Pittiglio & Filippo Reganati, 2011. "Outward Foreign Direct Investment and Domestic Performance: the Italian Manufacturing and Services Sectors," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(4), pages 369-381, December.
    5. 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.
    6. David Powell & Joachim Wagner, 2010. "The Exporter Productivity Premium along the Productivity Distribution: First Evidence from a Quantile Regression Approach for Fixed Effects Panel Data Models," Working Paper Series in Economics 182, University of Lüneburg, Institute of Economics.
    7. David Powell & Joachim Wagner, 2011. "The Exporter Productivity Premium along the Productivity Distribution Evidence from Unconditional Quantile Regression with Firm Fixed Effects," Working Papers 837, RAND Corporation.
    8. Tomaso Pompili & Michela Martinoia, 2011. "Building Synthetic Indicators For Aspects Of Territorial Capital Towards Their Impact On Regional Performance," ERSA conference papers ersa11p1528, European Regional Science Association.
    9. Michela Martinoia, 2014. "Local resources and territorial performance. Measures of natural, cultural and human capital," LIUC Papers in Economics 278, Cattaneo University (LIUC).
    10. repec:eee:chieco:v:44:y:2017:i:c:p:1-15 is not listed on IDEAS
    11. Michela Martinoia & Tomaso Pompili, 2015. "Building synthetic indicators for aspects of territorial capital," LIUC Papers in Economics 290, Cattaneo University (LIUC).
    12. David Powell & Joachim Wagner, 2014. "The exporter productivity premium along the productivity distribution: evidence from quantile regression with nonadditive firm fixed effects," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(4), pages 763-785, November.
    13. Martin Falk & Yvonne Wolfmayr, 2010. "The substitutability between parent company and foreign affiliate employment in Europe," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 37(1), pages 87-100, February.
    14. Martin Falk & Yvonne Wolfmayr, 2008. "The Impact of Outward FDI in Central and Eastern Europe on Employment in the EU-15 Countries," FIW Research Reports series I-016, FIW.

    More about this item

    Keywords

    Multinational Firms; Productivity; Employment; Quantile Regression;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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