Blessing or Curse? Domestic Plants' Survival and Employment Prospects after Foreign Acquisitions

35 Pages Posted: 9 Mar 2003

See all articles by Sourafel Girma

Sourafel Girma

Nottingham University Business School

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Date Written: January 2003

Abstract

This paper investigates whether the acquisition of a domestic establishment by a foreign owner has any effects on the survival prospects and employment growth of that plant. The analysis uses plant level data for the UK electronics and food industries for the period 1980 to 1993. We control for possible endogeneity using a matched sample of firms and instrumental variables. Estimating a standard hazard model yields the result that foreign takeover reduces the liftetime of the acquired plant in both the electronics and food sectors. Estimations of the determinants of employment growth in domestic plants provide some evidence that the incidence of takeover reduces employment growth, in particular for unskilled labour in the electronics industry. There is no significant effect for the food sector, however.

Keywords: Foreign Direct Investment, Acquisitions, Survival, Employment Growth

JEL Classification: L25, F23

Suggested Citation

Girma, Sourafel and Gorg, Holger, Blessing or Curse? Domestic Plants' Survival and Employment Prospects after Foreign Acquisitions (January 2003). IZA Discussion Paper No. 706. Available at SSRN: https://ssrn.com/abstract=383121

Sourafel Girma

Nottingham University Business School ( email )

Jubilee Campus
Nottingham, NG8 1BB
United Kingdom
+44 0 115 8466656 (Phone)

HOME PAGE: http://www.nottingham.ac.uk/~lizsmg/

Holger Gorg (Contact Author)

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

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