Foreign Ownership and Skillbiased Technological Change

50 Pages Posted: 21 Feb 2019

See all articles by Michael Koch

Michael Koch

University of Bayreuth

Marcel Smolka

University of Flensburg

Date Written: 2018

Abstract

We conduct an empirical investigation into the effects of foreign ownership on worker skills using firm-level data from Spain. To control for endogeneity bias due to selection into foreign ownership, we combine a difference-in-differences approach with a propensity score weighting estimator. Our results provide novel evidence that foreign-acquired firms actively raise the skills of their workforce in response to the acquisition by hiring high-skilled workers and providing worker training. To pin down the mechanism, we exploit unique information on whether firms use their foreign parent in exporting to foreign markets. Our results suggest a fundamental role for market access through the foreign parent in explaining skill upgrading in foreign-acquired firms. We reveal substantial productivity gains within foreign-acquired firms and we show that these gains derive from a concurrent effort to raise worker skills and adopt more advanced technology, suggesting a skill bias in technological innovations. We develop a simple theoretical model of foreign ownership featuring technology-skill complementarities in production that can rationalize our findings.

Keywords: multinational enterprises, mergers and acquisitions, skill-biased technological change, worker training, productivity

JEL Classification: D220, D240, F230, G340

Suggested Citation

Koch, Michael and Smolka, Marcel, Foreign Ownership and Skillbiased Technological Change (2018). Available at SSRN: https://ssrn.com/abstract=3338661 or http://dx.doi.org/10.2139/ssrn.3338661

Michael Koch (Contact Author)

University of Bayreuth ( email )

Universitatsstr 30
Bayreuth, D-95447
Germany

Marcel Smolka

University of Flensburg ( email )

Auf dem Campus 1
Flensburg, 24943
Germany

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