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Quantifying Productivity Gains from Foreign Investment

Christian Fons-Rosen (), Sebnem Kalemli-Ozcan (), Bent Sorensen, Carolina Villegas-Sanchez () and Vadym Volosovych ()

No 13-058/IV, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We quantify the effect of foreign investment on productivity of acquired firms using a new firm-level database for eight advanced European countries during 1999-2012. Foreign investors target high productivity firms. In order to control for this selection and isolate causal effects, we perform propensity score matching with firm fixed effects and also control for country-sector trends and mean-reversion in productivity. Following foreign acquisition, productivity increases modestly but only after four years, and only when foreign investors buy majority stakes. Our results are driven by foreign acquisitions and not by foreign divestment. The effect of foreign acquisitions on total factor productivity are an order of magnitude smaller in our sample of advanced countries relative to those found for emerging markets.

Keywords: Multinationals; Selection; Majority Ownership; Advanced Countries (search for similar items in EconPapers)
JEL-codes: E32 F15 F36 O16 (search for similar items in EconPapers)
Date: 2013-04-11, Revised 2019-01-27
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Working Paper: Quantifying Productivity Gains from Foreign Investment (2013) Downloads
Working Paper: Quantifying Productivity Gains from Foreign Investment (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20130058

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