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Innovation and Foreign Ownership

  • Maria Guadalupe
  • Olga Kuzmina
  • Catherine Thomas

This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that jointly explains the observed selection process and the innovation decisions. Further, we show in the data that innovation on acquisition is associated with the increased market scale provided by the parent firm.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16573.

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Date of creation: Dec 2010
Publication status: published as Maria Guadalupe & Olga Kuzmina & Catherine Thomas, 2012. "Innovation and Foreign Ownership," American Economic Review, American Economic Association, vol. 102(7), pages 3594-3627, December.
Handle: RePEc:nbr:nberwo:16573
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