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The Heterogeneity of Foreign Direct Investors: Linking Affiliates to Parent Productivity

Author

Listed:
  • Giorgia Giovannetti

    () (Dipartimento di Scienze per l'Economia e l'Impresa)

  • Enrico Marvasi
  • Giorgio Ricchiuti

    () (Dipartimento di Scienze per l'Economia e l'Impresa)

Abstract

We investigate the heterogeneity within the group of foreign direct investors and the relation between affiliates characteristics and parent productivity. Using data on Italian firms, we show that foreign direct investors differ in their productivity level according to their characteristics and their investment decisions. Larger parents by employment or sales tend to be more productive, to have more affiliates and to invest in a higher number of destinations. Focusing on manufacturing firms, we show econometrically that having more and larger affiliates in rich countries leads to higher ex-post productivity. In particular, investing in high income countries or both in high and low income countries is associated with a subsequent productivity premium \textit{vis-\`a-vis} low income countries investors, especially for larger parents. Low income countries investors are found to be relatively more productive when operating in low technology sectors, while the opposite applies to high income countries investors.

Suggested Citation

  • Giorgia Giovannetti & Enrico Marvasi & Giorgio Ricchiuti, 2015. "The Heterogeneity of Foreign Direct Investors: Linking Affiliates to Parent Productivity," Working Papers - Economics wp2015_13.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  • Handle: RePEc:frz:wpaper:wp2015_13.rdf
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    Keywords

    foreign direct investment; heterogeneous firms; total factor productivity; multinationals; foreign affiliates;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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