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Foreign acquisitions, domestic multinationals, and R&D

  • Bandick, Roger

    ()

    (Department of Economics)

  • Görg, Holger

    (Kiel Institute for the World Economy)

  • Karpaty, Patrik

    (Swedish Business School)

The aim of this paper is to evaluate the causal effect of foreign acquisition on R&D intensity in targeted domestic firms. We are able to distinguish domestic multinationals and non-multinationals, which allows us to investigate the fear that the change in ownership of domestic to foreign multinationals leads to a reduction in R&D activity in the country, as headquarter activities are relocated to the new owner’s home country. We use unique and rich firm level data for the Swedish manufacturing sector and different micro-econometric estimation strategies in order to control for the potential endogeneity of the acquisition dummy. Overall, our results give no support to the fears that foreign acquisition of domestic firms lead to a brain drain of R&D activity in Swedish MNEs. Rather, this paper finds robust evidence that foreign acquisitions lead to increasing R&D intensity in acquired domestic MNEs and non-MNEs.

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File URL: http://www.hha.dk/nat/wper/10-11_rbandick.pdf
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Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 10-11.

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Length: 35 pages
Date of creation: 01 Dec 2010
Date of revision:
Handle: RePEc:hhs:aareco:2010_011
Contact details of provider: Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
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Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx
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  1. Stephen Yeaple & Volker Nocke, 2005. "An Assignment Theory of Foreign Direct Investment," 2005 Meeting Papers 146, Society for Economic Dynamics.
  2. Patrik Karpaty, 2006. "Does Multinationality Matter? Evidence from Swedish firm data," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(2), pages 101-122.
  3. Blomström, Magnus & Fors, Gunnar & Lipsey, Robert E., 1997. "Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden," SSE/EFI Working Paper Series in Economics and Finance 200, Stockholm School of Economics.
  4. Bertrand, Olivier, 2009. "Effects of foreign acquisitions on R&D activity: Evidence from firm-level data for France," Research Policy, Elsevier, vol. 38(6), pages 1021-1031, July.
  5. James R. Markusen, 1998. "Multinational Firms, Location and Trade," The World Economy, Wiley Blackwell, vol. 21(6), pages 733-756, 08.
  6. Ekholm, Karolina & Hakkala, Katariina, 2004. "Location of R&D and High-Tech Production by Vertically Integrated Multinationals," Working Paper Series 616, Research Institute of Industrial Economics.
  7. Beata Javorcik & Jens Matthias Arnold, 2009. "Gifted Kids or Pushy Parents? Foreign Direct Investment and Plant Productivity in Indonesia," Economics Series Working Papers 434, University of Oxford, Department of Economics.
  8. Giorgio Barba Navaretti & Davide Castellani & Anne-Célia Disdier, 2006. "How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy," Development Working Papers 215, Centro Studi Luca d\'Agliano, University of Milano.
  9. Kristiina Huttunen, 2007. "The Effect of Foreign Acquisition on Employment and Wages: Evidence from Finnish Establishments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 497-509, August.
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