Innovation, Employment Growth, and Foreign Ownership of Firms - A European Perspective
48 Pages Posted: 26 Apr 2013
Date Written: 2013
This paper examines how foreign-owned and domestically owned firms transform innovation into employment growth. The empirical analysis, based on the model of Harrison, Jaumandreu, Mairesse and Peters (2008) and CIS data for 16 countries, reveals important differences between the two groups: Due to general productivity increases and process innovation, foreign-owned firms experience higher job losses than domestically owned firms. At the same time, employment-creating effects of product innovation are larger for foreign-owned firms. Together with employment-stimulating effects stemming from existing products, they overcompensate the negative displacement effects resulting in net employment growth in foreign-owned firms. However, net employment growth turns out to be smaller in foreign-owned firms than in domestically owned firms.
Keywords: employment, innovation, foreign ownership, Community Innovation Survey, host country effects
JEL Classification: O31, O33, F23
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