Productivity premium of multinationals in global ownership linkages: A comparison of second‐tier subsidiaries

Eiichi Tomiura and Hiroshi Kumanomido

Review of International Economics, 2023, vol. 31, issue 4, 1222-1245

Abstract: High productivity of foreign direct investment (FDI) firms is a stylized fact. However, in the real world, there are subsidiaries owned by foreign parents but establishing their own foreign subsidiaries. Based on global ownership linkage data, we compare productivity levels of subsidiaries owned by parents in G‐7 countries but located worldwide. The FDI productivity premium is on average significantly small if investing firms are owned by foreign parents. Among firms with subsidiaries, the foreign ownership tends to reduce the FDI premium more when firms depend more on intangibles. This suggests that knowledge transfers within multinationals facilitate subsidiaries to make their own FDI.

Date: 2023
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