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The impact of outward FDI on the domestic perimeter of manufacturing groups

Author

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  • Alexandre Gazaniol

    (Université Paris Dauphine, LEDa UMR 225 DIAL, IRD)

Abstract

(english) This article aims to analyze the structure and the performance of multinational firms at the group level, and to estimate the impact of outward FDI on the domestic perimeter of manufacturing groups. This empirical work anticipates a major reshape of business statistics, which does not consider Legal Entities (LEs) as the relevant unit for economic analysis. In order to construct new statistical units which enjoy some degrees of autonomy, we use a French dataset (“LiFi”) which allows gathering all French LEs which belong to the same group. We show that nearly all multinational firms in the French manufacturing sector are organized around several LEs and we describe the implications of this organizational choice in terms of market structure and performance. Following firms which invest abroad for the first time reveals that outward FDI has a positive effect on the whole domestic perimeter of groups, since value-added, employment and exports significantly increase ex-post. The growth of employment is especially high in companies dedicated to auxiliary functions so the share of employees in the manufacturing perimeter tends to decrease after the investment. _________________________________ (français) Cet article vise à analyser la structure et les performances des firmes multinationales au niveau des groupes de sociétés, et à estimer l’impact des IDE sortants sur le périmètre domestique des groupes industriels. Il s’inscrit dans une refonte des statistiques d’entreprises, qui vise à dépasser le niveau des entités juridiques pour adopter une définition économique de l’entreprise, tenant compte de son degré d’autonomie. Afin de construire de nouvelles unités statistiques jouissant d’une autonomie de décision, nous utilisons l’enquête LiFi, qui nous permet de rassembler les sociétés françaises appartenant à un même groupe. Nous montrons que presque toutes les firmes multinationales dans l’industrie manufacturière française s’organisent autour de plusieurs entités juridiques et nous décrivons les implications de ce choix organisationnel en termes de structure de marché et de performances. L’analyse en dynamique des firmes qui investissent à l’étranger pour la première fois révèle que les IDE sortants ont un impact positif sur l’ensemble du périmètre domestique des groupes, dont la valeur ajoutée, l’emploi et les exportations augmentent significativement ex-post. La croissance de l’emploi apparaît plus soutenue dans les sociétés dédiées aux fonctions en support de la production, ce qui suggère que les IDE sortants contribuent à la désindustrialisation des pays développés.

Suggested Citation

  • Alexandre Gazaniol, 2012. "The impact of outward FDI on the domestic perimeter of manufacturing groups," Working Papers DT/2012/03, DIAL (Développement, Institutions et Mondialisation).
    • Handle: RePEc:dia:wpaper:dt201203
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    References listed on IDEAS

    as
    1. Alexander Hijzen & Sébastien Jean & Thierry Mayer, 2011. "The effects at home of initiating production abroad: evidence from matched French firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(3), pages 457-483, September.
    2. Becker, Sascha O. & Ekholm, Karolina & Muendler, Marc-Andreas, 2013. "Offshoring and the onshore composition of tasks and skills," Journal of International Economics, Elsevier, vol. 90(1), pages 91-106.
    3. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    4. Giorgio Barba Navaretti & Davide Castellani & Anne-Célia Disdier, 2010. "How does investing in cheap labour countries affect performance at home? Firm-level evidence from France and Italy," Oxford Economic Papers, Oxford University Press, vol. 62(2), pages 234-260, April.
    5. David Greenaway & Richard Kneller, 2007. "Firm heterogeneity, exporting and foreign direct investment," Economic Journal, Royal Economic Society, vol. 117(517), pages 134-161, February.
    6. Head, Keith & Ries, John, 2002. "Offshore production and skill upgrading by Japanese manufacturing firms," Journal of International Economics, Elsevier, vol. 58(1), pages 81-105, October.
    7. 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.
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    Cited by:

    1. Damijan, Jože & Kostevc, Crt & Rojec, Matija, 2014. "Outward FDI and company performance in CEECs," Working Paper Series in Economics and Institutions of Innovation 381, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

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    More about this item

    Keywords

    Multinational firms; business groups; profiling; FDI; relocations; firms performance; deindustrialization; skill upgrading.;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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