Quantifying Productivity Gains from Foreign Investment

56 Pages Posted: 22 Mar 2013 Last revised: 13 Mar 2023

See all articles by Christian Fons-Rosen

Christian Fons-Rosen

University of California, Merced

Sebnem Kalemli-Ozcan

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Koc University, Graduate School of Business

Bent E. Sørensen

University of Houston - Department of Economics; Centre for Economic Policy Research (CEPR)

Carolina Villegas-Sanchez

ESADE Business School

Vadym Volosovych

Erasmus University Rotterdam (EUR); Tinbergen Institute

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Date Written: March 2013

Abstract

We revisit the relationship between foreign investment and productivity of acquired firms. First, we construct a panel firm-level dataset for eight advanced European countries covering domestic and foreign acquisitions together with detailed balance sheet information for the years 1999{2012. Second, we address the challenge of identifying a causal relation. To that end, we compare foreign to domestic acquisitions in addition to accounting for the impact of majority versus minority acquisitions after controlling for country and sector trends. The productivity of foreign acquired affiliates increases modestly after four years, but only when majority stakes are acquired by foreigners. Our results are driven by foreign acquisitions and not by foreign divestment.

Suggested Citation

Fons-Rosen, Christian and Kalemli-Ozcan, Sebnem and Sorensen, Bent E. and Villegas-Sanchez, Carolina and Volosovych, Vadym, Quantifying Productivity Gains from Foreign Investment (March 2013). NBER Working Paper No. w18920, Available at SSRN: https://ssrn.com/abstract=2237832

Christian Fons-Rosen (Contact Author)

University of California, Merced ( email )

P.O. Box 2039
Merced, CA 95344
United States

Sebnem Kalemli-Ozcan

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

National Bureau of Economic Research (NBER)

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Koc University, Graduate School of Business ( email )

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Bent E. Sorensen

University of Houston - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

Carolina Villegas-Sanchez

ESADE Business School ( email )

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Barcelona, 08034
Spain

Vadym Volosovych

Erasmus University Rotterdam (EUR) ( email )

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Netherlands
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HOME PAGE: http://https://www.eur.nl/people/vadym-volosovych/

Tinbergen Institute

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Netherlands
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+31 10 408 9165 (Fax)

HOME PAGE: http://https://www.tinbergen.nl/person/1407/vadym-volosovych

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