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Home Firm Performance after Foreign Investments and Divestitures

Listed author(s):
  • Engel, Dirk
  • Procher, Vivien

Being international' has nearly become an undisputed aim for firms in a globalized world. Several papers find a positive relationship between foreign direct investment (FDI) and the home performance of firms. In this paper we address the 'FDI - export' relationship to better understand this pattern. Furthermore, by presenting first results on firm's post-divestiture employment growth at home we are able to provide a more comprehensive view on fi rm performance after stepping in and out of foreign markets. We apply a propensity score matching technique in combination with a difference-in-difference estimator to analyze the performance dynamics of French firms that invested abroad or carried out foreign divestitures during the period 2000-2007. FDI has on average a positive home firm eff ect in terms of export share, operating turnover and employment. Industry differences reveal that firms in high-tech industries experience a strong increase in their home performance, whereas firm performance in low-tech industries increases only moderately in post-investment periods. In contrast, the divestiture impact on the post-divestiture performance is rather negligible.

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Paper provided by RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen in its series Ruhr Economic Papers with number 193.

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Date of creation: 2010
Handle: RePEc:zbw:rwirep:193
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