What a difference an OFDI makes. Firm-level evidence from the EU

Koray Aktaş, Valeria Gattai and Piergiovanna Natale

International Economics, 2024, vol. 180, issue C

Abstract: Using a large panel of European firms covering the years 2007–2015, this study investigates the effects of outward foreign direct investment (OFDI) on performance. Controlling for self-selection through propensity score matching techniques at baseline in a two-way fixed effect difference-in-differences framework, we determine that OFDI firms exhibit higher productivity, value-added, sales, and profit compared with non-OFDI firms. Heterogeneity analysis by destination reveals that the highest performance premia accrue to firms that invested in non-European Union (EU) countries, developed economies and technology-advanced hosts. Heterogeneity analysis by ownership structure shows that OFDI established via joint-venture or wholly owned enterprises have similar, positive performance premia. Furthermore, investing abroad entails no reduction in the parent companies’ number of employees. Finally, we document an increase in research and development expenditure for OFDI firms at both intensive and extensive margins, indicating a potential driver of the observed performance premia.

Keywords: Outward foreign direct investment (OFDI); Foreign direct investment (FDI); European Union (EU); Performance premia; Propensity score matching (PSM); Difference-in-differences (DID) (search for similar items in EconPapers)
JEL-codes: F23 L25 O52 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S211070172400060X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:180:y:2024:i:c:s211070172400060x

DOI: 10.1016/j.inteco.2024.100537

Access Statistics for this article

International Economics is currently edited by Valerie Mignon and Marcelo Olarreaga

More articles in International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().