Multinational Activity of European Firms and Heterogeneity

30 Pages Posted: 10 May 2018

See all articles by José C. Fariñas

José C. Fariñas

Universidad Complutense de Madrid (UCM) - Department of Applied Economics II

Ana Martín‐Marcos

Universidad Nacional de Educacion a Distancia (UNED)

Francisco J. Velázquez

Universidad Complutense de Madrid - GRIPICO

Date Written: May 2018

Abstract

This paper offers an empirical assessment of the multinational activity of European firms. It takes the predictions of models of firm heterogeneity and FDI activity as a reference to explore the characteristics of multinational firms from 30 European countries. We use a data set, based on ORBIS, which links information of parent–affiliate pairs of firms. Our results show that more productive firms have greater multinational activity in terms of both scope, the number of foreign markets where they invest, and scale, the volume of local sales by subsidiaries active in foreign markets. The estimation of gravity equations shows that country characteristics that encourage multinational activity successively induce the entry of less productive parent firms. We confirm this asymmetry for the GDPs of the home and host countries, distance, contiguity and other standard gravity equation variables.

Keywords: firm heterogeneity, foreign direct investment, multinational corporations, productivity

Suggested Citation

Fariñas, José C. and Martín‐Marcos, Ana and Velázquez, Francisco J., Multinational Activity of European Firms and Heterogeneity (May 2018). The World Economy, Vol. 41, Issue 5, pp. 1166-1195, 2018. Available at SSRN: https://ssrn.com/abstract=3175648 or http://dx.doi.org/10.1111/twec.12613

José C. Fariñas (Contact Author)

Universidad Complutense de Madrid (UCM) - Department of Applied Economics II ( email )

Faculty of Economic Science and Enterprises
Somosaguas Campus
Madrid, E-28223
Spain

Ana Martín‐Marcos

Universidad Nacional de Educacion a Distancia (UNED)

Calle Bravo Murillo, 38
Madrid 28006, Madrid 28040
Spain

Francisco J. Velázquez

Universidad Complutense de Madrid - GRIPICO ( email )

Pabellon de Segundo
Somosaguas Campus
Madrid, Madrid E-28223
Spain
+34 91 394 24 58 (Phone)
+34 91 394 24 58 (Fax)

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