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Quantifying Productivity Gains from Foreign Investment

Author

Listed:
  • Christian Fons-Rosen

    (Universitat Pompeu Fabra, Barcelona Graduate School of Economics)

  • Sebnem Kalemli-Ozcan

    (University of Maryland, CEPR, NBER)

  • Bent E. Sorensen

    (University of Houston, CEPR)

  • Carolina Villegas-Sanchez

    (ESADE, Universitat Ramon Llull)

  • Vadym Volosovych

    (Erasmus University Rotterdam and ERIM Research Institute of Management)

Abstract

We revisit the relationship between foreign investment and productivity of acquired firms. First, we construct a panel firm-level dataset for eight advanced European countries covering domestic and foreign acquisitions together with detailed balance sheet information for the years 1999{2012. Second, we address the challenge of identifying a causal relation. To that end, we compare foreign to domestic acquisitions in addition to accounting for the impact of majority versus minority acquisitions after controlling for country and sector trends. The productivity of foreign acquired affiliates increases modestly after four years, but only when majority stakes are acquired by foreigners. Our results are driven by foreign acquisitions and not by foreign divestment.

Suggested Citation

  • Christian Fons-Rosen & Sebnem Kalemli-Ozcan & Bent E. Sorensen & Carolina Villegas-Sanchez & Vadym Volosovych, 2013. "Quantifying Productivity Gains from Foreign Investment," Tinbergen Institute Discussion Papers 13-058/IV, Tinbergen Institute, revised 24 Feb 2020.
  • Handle: RePEc:tin:wpaper:20130058
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    References listed on IDEAS

    as
    1. Ackerberg, Daniel & Caves, Kevin & Frazer, Garth, 2006. "Structural identification of production functions," MPRA Paper 38349, University Library of Munich, Germany.
    2. Mathias M. Siems & Michael C. Schouten, 2009. "The Evolution of Ownership Disclosure Rules across Countries," Working Papers wp393, Centre for Business Research, University of Cambridge.
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    More about this item

    Keywords

    Multinationals; Selection; Majority Ownership; Advanced Countries;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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