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Home Country Effects of Investing Abroad: Evidence from Quantile Regressions

  • Anna Maria Falzoni

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

  • Mara Grasseni

    (University of Bergamo, Italy)

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.

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Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 170.

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Length: 38 pages
Date of creation: Jun 2005
Date of revision: Jun 2005
Handle: RePEc:cri:cespri:wp170
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  1. Keller, Wolfgang & Yeaple, Stephen R., 2005. "Multinational enterprises international trade, and productivity growth: Firm-level evidence from the United States," Discussion Paper Series 1: Economic Studies 2005,07, Deutsche Bundesbank, Research Centre.
  2. 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.
  3. 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.
  4. Robert E. Lipsey, 1999. "Foreign Production by U.S. Firms and Parent Firm Employment," NBER Working Papers 7357, National Bureau of Economic Research, Inc.
  5. Barba Navaretti, Giorgio & Castellani, Davide, 2004. "Investments Abroad and Performance at Home: Evidence from Italian Multinationals," CEPR Discussion Papers 4284, C.E.P.R. Discussion Papers.
  6. 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.
  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. 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.
  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, vol. 137(4), pages 644-665, December.
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