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Multinationals, foreign ownership and US productivity leadership: Evidence from the UK

Author

Listed:
  • Criscuolo, Chiara
  • Ralf Martin

    (Centre for Research into Business Activity)

Abstract

Several studies using firm level data find that foreign-owned firms are more productive than domestic ones. This could reflect a foreign advantage or an omitted variable bias: foreign firms are by definition multinational enterprises (MNEs), and MNEs are typically more productive than non-MNEs. This paper attempts to discriminate between these hypotheses. We are the first to study the productivity of foreign owned firms relative to UK firms separated into MNEs and non-MNEs. We obtain three main results. First, the foreign productivity advantage is mostly a multinational advantage: MNEs, foreign and UK, are more productive than non-MNEs. Second, US owned firms maintain a productivity advantage with respect to both UK and other foreign owned firms. Third, examining the longitudinal dimension of our data we find no evidence that higher MNE productivity is driven by sharing superior firm specific knowledge among affiliated plants. Thus, the MNE advantage must lie in an ability to takeover already productive plants or in setting up above average productivity plants on green field.

Suggested Citation

  • Criscuolo, Chiara & Ralf Martin, 2003. "Multinationals, foreign ownership and US productivity leadership: Evidence from the UK," Royal Economic Society Annual Conference 2003 50, Royal Economic Society.
    • Handle: RePEc:ecj:ac2003:50
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    Citations

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    Cited by:

    1. Priit Vahter & Jaan Masso, 2007. "Home versus Host Country Effects of FDI: Searching for New Evidence of Productivity Spillovers," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(2), pages 165-196.
    2. Ralf Martin, 2005. "Productivity Dispersion, Competition and Productivity Measurement," CEP Discussion Papers dp0692, Centre for Economic Performance, LSE.
    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. Raymond Mattaloni Jr., 2011. "The Productivity Advantage and Global Scope of U.S. Multinational Firms," BEA Working Papers 0070, Bureau of Economic Analysis.
    5. Nigel Driffield & Jun Du, 2007. "Privatisation, State Ownership and Productivity: Evidence from China," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(2), pages 215-239.
    6. Martin Boddy & John Hudson & Anthony Plumridge & Don Webber, 2005. "Regional Productivity Differentials: Explaining the Gap," Working Papers 0515, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    7. Davide Castellani & Antonello Zanfei, 2007. "Internationalisation, Innovation and Productivity: How Do Firms Differ in Italy?," The World Economy, Wiley Blackwell, vol. 30(1), pages 156-176, January.
    8. Davide Castellani & Giorgia Giovannetti, 2010. "Productivity and the international firm: dissecting heterogeneity," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 13(1), pages 25-42.

    More about this item

    Keywords

    Multinational Firms; Productivity; Foreign Ownership; US leadership; Double Fixed-Effects;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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