Does Foreign Presence Stimulate Creative Destruction in Local Markets

Mika Maliranta and Satu Nurmi

No 1114, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: This paper studies the effect of foreign-owned companies (FOCs) in the region on establishment survival and growth in the Finnish business sector. We analyze whether the presence of the FOCs has asymmetric effects among the local businesses. Foreign presence in the region is measured in a novel way by using the regional links between establishments and their workers in the local labour markets. Evidence for small service establishments suggests that the presence of the FOCs contributes to aggregate productivity by cleansing inefficient units. The FOCs do not seem to stimulate productivity-enhancing restructuring among large, manufacturing or continuing establishments.

Keywords: foreign ownership; local labour markets; survival; growth; company efficiency; selection; reallocation (search for similar items in EconPapers)
JEL-codes: F23 J23 R11 R23 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:rif:dpaper:1114

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