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Investments Abroad and Performance at Home Evidence from Italian Multinationals

Author

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  • Giorgio Barba Navaretti

    (University of Milan and Centro Studi Luca d’Agliano)

  • Davide Castellani

    (University of Urbino)

Abstract

Foreign activities of MNEs have important effects on home economies. The debate is ambiguous: concerns that foreign investments deplete domestic economies are often coupled with the pride for doing good business in foreign countries. This paper addresses this question by defining the appropriate counterfactual: what would have happened to investing firms if they had not invested abroad. It applies propensity score matching to derive these hypothetical performance trajectories from a sample of national firms which never invested abroad. For a sample of Italian firms, it finds that investments improves growth of total factor productivity and output. It also finds no significant effects on employment. These results support the view that foreign investments strengthen rather than depleting home activities.

Suggested Citation

  • 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.
  • Handle: RePEc:csl:devewp:180
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    More about this item

    Keywords

    multinational firms; productivity; propensity score matching;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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