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Going multinational: What are the effects on home market performance?

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  • Jäckle, Robert

Abstract

A number of recent studies nd evidence for the existence of a persistent performance gap between multinational enterprises (MNE) and their domestic competitors. Therefore, the question arises whether successful rms become MNEs or whether going abroad improves home market performance. This paper investigates to what extent MNEs have superior performance characteristics, both prior to and after they have switched from national to multinational activities. In the rst case results are quite clear: Future multinationals outperform domestic rms. Since self-selection occurs, an endogenous treatment approach is necessary for comparing ex-post performance of rms. Using probit estimates of the decision to become a MNE, Heckman's (1978) treatment model is applied to account for potential endogeneity issues. The results suggest that after switching, both productivity and wage growth are higher for newly founded MNEs than for national rms. Employment growth is superior before switching but does not exhibit signi cantly higher ex-post growth rates. Moreover, capital intensities at multinationals evolve towards the use of capital.

Suggested Citation

  • Jäckle, Robert, 2006. "Going multinational: What are the effects on home market performance?," Discussion Paper Series 1: Economic Studies 2006,03, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdp1:4240
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    Cited by:

    1. Marc-Andreas Muendler & Sascha O. Becker, 2010. "Margins of Multinational Labor Substitution," American Economic Review, American Economic Association, vol. 100(5), pages 1999-2030, December.
    2. repec:eee:iburev:v:26:y:2017:i:3:p:405-416 is not listed on IDEAS
    3. Peter S. Eppinger, 2014. "Exploiting the Potential for Services Offshoring: Evidence from German Firms," IAW Discussion Papers 109, Institut für Angewandte Wirtschaftsforschung (IAW).
    4. Trax, Michaela, 2011. "Productivity and the Internationalization of Firms – Cross-border Acquisitions versus Greenfield Investments," Ruhr Economic Papers 259, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Muendler, Marc A & Becker, Sascha O., 2006. "The Effect of FDI on Job Separation," University of California at San Diego, Economics Working Paper Series qt28h3p82z, Department of Economics, UC San Diego.
    6. John P. Weche Gelübcke, 2013. "Foreign and Domestic Takeovers in Germany: Cherry-picking and Lemon-grabbing," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 59(4), pages 275-294.
    7. repec:zbw:rwirep:0259 is not listed on IDEAS
    8. Michaela Trax, 2011. "Productivity and the Internationalization of Firms – Cross-border Acquisitions versus Greenfield Investments," Ruhr Economic Papers 0259, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    9. Schäffler, Johannes, 2016. "German Direct Investments in the Czech Republic – Employment Effects on German Multinational Enterprises," Annual Conference 2016 (Augsburg): Demographic Change 145526, Verein für Socialpolitik / German Economic Association.
    10. Becker, Johannes & Riedel, Nadine, 2012. "Cross-border tax effects on affiliate investment—Evidence from European multinationals," European Economic Review, Elsevier, vol. 56(3), pages 436-450.
    11. Dirk Engel & Vivien Procher, 2013. "Home Firm Performance After Foreign Investments and Divestitures," The World Economy, Wiley Blackwell, vol. 36(12), pages 1478-1493, December.
    12. repec:zbw:rwirep:0193 is not listed on IDEAS
    13. repec:eee:iburev:v:27:y:2018:i:1:p:56-65 is not listed on IDEAS
    14. Eppinger, Peter S., 2017. "Service offshoring and firm employment," University of Tuebingen Working Papers in Economics and Finance 103, University of Tuebingen, Faculty of Economics and Social Sciences.
    15. Wen-Chung Hsu & Xingbo Gao & Jianhua Zhang & Hsin Mei Lin, 2011. "The effects of outward FDI on home-country productivity: Do location of investment and market orientation matter?," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 4(2), pages 99-116, June.
    16. Castellani, Davide & Montresor, Sandro & Schubert, Torben & Vezzani, Antonio, 2017. "Multinationality, R&D and productivity: Evidence from the top R&D investors worldwide," International Business Review, Elsevier, vol. 26(3), pages 405-416.
    17. Dirk Engel & Vivien Procher, 2010. "Home Firm Performance after Foreign Investments and Divestitures," Ruhr Economic Papers 0193, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    18. Francesco Di Comite & d’Artis Kancs, 2015. "Macro-Economic Models for R&D and Innovation Policies," JRC Working Papers on Corporate R&D and Innovation 2015-03, Joint Research Centre (Seville site).
    19. Goldbach, Stefan & Nagengast, Arne J. & Steinmüller, Elias & Wamser, Georg, 2017. "The effect of investing abroad on investment at home: On the role of technology, tax savings, and internal capital markets," Discussion Papers 14/2017, Deutsche Bundesbank.

    More about this item

    Keywords

    Multinational enterprises; productivity; endogenous treatment;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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