Foreign Direct Investment, Source Country Heterogeneity and Management Practices

59 Pages Posted: 7 Oct 2014

See all articles by Fredrik Heyman

Fredrik Heyman

Research Institute of Industrial Economics (IFN)

Pehr-Johan Norback

Research Institute of Industrial Economics (IFN)

Rickard Hammarberg

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 2 versions of this paper

Date Written: September 25, 2014

Abstract

This paper examines whether and, if so, why source country heterogeneity exists in foreign direct investment (FDI). Using detailed data on all Swedish firms for the period from 1996 to 2009, we find statistical evidence that affiliate performance differs systematically across source countries. For instance, affiliates of US multinational enterprises (MNEs) are, on average, approximately three times more productive than affiliates headquartered in the Nordic countries. One possible explanation for these discrepancies is differences in organization practices across source countries. Using new firm-level data from the World Management Survey to estimate a global index of the quality of management practices for MNEs with headquarters in our source countries of interest, we find that source country heterogeneity in affiliate performance is highly correlated with differences in management practices.

Keywords: Multinational firms, FDI, Management practices, Firm performance

JEL Classification: F21, F23, L1, M1

Suggested Citation

Heyman, Fredrik and Norback, Pehr-Johan and Hammarberg, Rickard, Foreign Direct Investment, Source Country Heterogeneity and Management Practices (September 25, 2014). IFN Working Paper No. 1041. Available at SSRN: https://ssrn.com/abstract=2506462 or http://dx.doi.org/10.2139/ssrn.2506462

Fredrik Heyman (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se

Pehr-Johan Norback

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Rickard Hammarberg

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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