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Foreign Owners and Plant Survival

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  • Andrew B. Bernard
  • Fredrik Sjoholm

Abstract

In recent years, international capital flows of all types have increased dramatically and most governments have been actively encouraging inflows of direct investment. However, concerns remain that reliance on foreign multinationals may be a risky development strategy as foreign firms are likely to be less rooted in the local economy and may be quicker to close down production. This paper asks whether foreign owners are more likely to close plants than domestic owners. In Indonesia, plants with any foreign ownership are far less likely to close than wholly-owned domestic plants. However, the lower probability of shutdown is a result of the larger size of foreign plants rather than their nationality of ownership. Controlling for plant size and productivity, we find that foreign plants are significantly more likely to close than comparable domestic establishments.

Suggested Citation

  • Andrew B. Bernard & Fredrik Sjoholm, 2003. "Foreign Owners and Plant Survival," NBER Working Papers 10039, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10039
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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