(Not So) Easy Come, (Still) Easy Go? Footloose Multinationals Revisited

National Bank of Belgium Working Paper No. 223

42 Pages Posted: 26 Mar 2012

See all articles by Pierre Blanchard

Pierre Blanchard

affiliation not provided to SSRN

Emmanuel Dhyne

National Bank of Belgium

Catherine Fuss

National Bank of Belgium

Claude Mathieu

affiliation not provided to SSRN

Date Written: March 1, 2012

Abstract

This paper revisits the "footloose" nature of multinational firms (MNFs) hypothesis. Using firm-level data for Belgium over the period 1997-2008, we rely on a Probit model and take into account the endogeneity of the determinants of firm exit. Our results may be summarised as follows. First, the unconditional exit probability of MNFs is lower than that of domestic firms. Second, controlling for firm and sector characteristics - firm age, Total Factor Productivity, sunk costs, size, competition on the product market, sector-level value added growth, and sector dummies - the difference between the exit probability of MNFs and domestic firms becomes positive. Third, our results show that MNFs have a lower sensitivity to sunk costs and size than do domestic firms, which may be interpreted as lower exit barriers due to greater possibilities of relocating tangible and intangible assets to foreign affiliates.

Keywords: firm exit, multinationals, Total Factor Productivity, sunk costs, panel data, Probit model

JEL Classification: D22, F23

Suggested Citation

Blanchard, Pierre and Dhyne, Emmanuel and Fuss, Catherine and Mathieu, Claude, (Not So) Easy Come, (Still) Easy Go? Footloose Multinationals Revisited (March 1, 2012). National Bank of Belgium Working Paper No. 223. Available at SSRN: https://ssrn.com/abstract=2028921 or http://dx.doi.org/10.2139/ssrn.2028921

Pierre Blanchard

affiliation not provided to SSRN ( email )

Emmanuel Dhyne

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Catherine Fuss (Contact Author)

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Claude Mathieu

affiliation not provided to SSRN ( email )

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