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Blessing or Curse? Domestic Plants' Survival and Employment Prospects after Foreign Acquisitions

  • Girma, Sourafel


    (University of Nottingham)

  • Görg, Holger


    (Kiel Institute for the World Economy)

This paper investigates whether the acquisition of a domestic establishment by a foreign owner has any effects on the survival prospects and employment growth of that plant. The analysis uses plant level data for the UK electronics and food industries for the period 1980 to 1993. We control for possible endogeneity using a matched sample of firms and instrumental variables. Estimating a standard hazard model yields the result that foreign takeover reduces the liftetime of the acquired plant in both the electronics and food sectors. Estimations of the determinants of employment growth in domestic plants provide some evidence that the incidence of takeover reduces employment growth, in particular for unskilled labour in the electronics industry. There is no significant effect for the food sector, however.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 706.

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Length: 35 pages
Date of creation: Jan 2003
Date of revision:
Publication status: published in: Applied Economics Quarterly, 2004, 50 (1), 89-110
Handle: RePEc:iza:izadps:dp706
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  8. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Entry, Exit and Establishment Survival in UK Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 91-112, 03.
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  11. Dickerson, Andrew P & Gibson, Heather D & Tsakalotos, Euclid, 1997. "The Impact of Acquisitions on Company Performance: Evidence from a Large Panel of UK Firms," Oxford Economic Papers, Oxford University Press, vol. 49(3), pages 344-61, July.
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  13. Rachel Griffith & Helen Simpson, 2004. "Characteristics of Foreign-Owned Firms in British Manufacturing," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 147-180 National Bureau of Economic Research, Inc.
  14. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 227-45, September.
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  16. Holger Gorg & Eric Strobl., 2001. "Multinational Companies, Technology Spillovers and Plant Survival: Evidence for Irish Manufacturing," European Economy Group Working Papers 8, European Economy Group.
  17. Conyon, Martin J. & Girma, Sourafel & Thompson, Steve & Wright, Peter W., 2002. "The impact of mergers and acquisitions on company employment in the United Kingdom," European Economic Review, Elsevier, vol. 46(1), pages 31-49, January.
  18. Robert H. McGuckin & Sang V. Nguyen & Arnold P. Reznek, 1998. "On Measuring the Impact of Ownership Change on Labor: Evidence from U.S. Food-Manufacturing Plant-Level Data," NBER Chapters, in: Labor Statistics Measurement Issues, pages 207-248 National Bureau of Economic Research, Inc.
  19. Thompson, Steve, 1999. "Takeovers, Joint Ventures and the Acquisition of Resources for Diversification," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(3), pages 303-18, August.
  20. Ravenscraft, David J & Scherer, F M, 1987. "Life after Takeover," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 147-56, December.
  21. Vella, Francis & Verbeek, Marno, 1999. "Estimating and Interpreting Models with Endogenous Treatment Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 473-78, October.
  22. Conyon, Martin J, et al, 2002. "The Productivity and Wage Effects of Foreign Acquisition in the United Kingdom," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 85-102, March.
  23. Holger G–rg & Eric Strobl, 2003. "Multinational Companies, Technology Spillovers and Plant Survival," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 581-595, December.
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  25. Mark E. Doms & J . Bradford Jensen, 1998. "Comparing Wages, Skills, and Productivity between Domestically and Foreign-Owned Manufacturing Establishments in the United States," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 235-258 National Bureau of Economic Research, Inc.
  26. Driffield, Nigel, 2001. "The Impact of Domestic Productivity of Inward Investment in the UK," Manchester School, University of Manchester, vol. 69(1), pages 103-19, January.
  27. Rachel Griffith, 1999. "Using the ARD establishment level data to look at foreign ownership and productivity in the UK," IFS Working Papers W99/06, Institute for Fiscal Studies.
  28. Reinhard Hujer & Kai-Oliver Maurer & Marc Wellner, 1999. "Estimating the Effect of Vocational Training on Unemployment Duration in West Germany: A Discrete Hazard Rate Model with Instrumental Variables," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 218(5+6), pages 619-646, May.
  29. Girma, Sourafel & Wakelin, Katharine, 2001. "Regional Underdevelopment: Is FDI the Solution? A Semiparametric Analysis," CEPR Discussion Papers 2995, C.E.P.R. Discussion Papers.
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