Investments Abroad and Performance at Home: Evidence from Italian Multinationals

32 Pages Posted: 6 Apr 2004

See all articles by Giorgio Barba Navaretti

Giorgio Barba Navaretti

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM); University of Milan - Centro Studi Luca d'Agliano (LdA)

Davide Castellani

Henley Business School

Date Written: March 2004

Abstract

Foreign activities of MNEs have important effects on home economies. The debate is ambiguous: concerns that foreign investments deplete domestic economies are often coupled with the pride for doing good business in foreign countries. This paper addresses this question by defining the appropriate counterfactual: what would have happened to investing firms if they had not invested abroad? It applies propensity score matching to derive these hypothetical performance trajectories from a sample of national firms which have never invested abroad. For a sample of Italian firms, it finds that investments improve growth of total factor productivity and output. It also finds no significant effects on employment. These results support the view that foreign investments strengthen rather than deplete home activities.

Keywords: Multinational firms, productivity, propensity score matching

JEL Classification: C14, D21, F23

Suggested Citation

Barba Navaretti, Giorgio and Castellani, Davide, Investments Abroad and Performance at Home: Evidence from Italian Multinationals (March 2004). Available at SSRN: https://ssrn.com/abstract=527562

Giorgio Barba Navaretti (Contact Author)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy
+390250321521 (Phone)

University of Milan - Centro Studi Luca d'Agliano (LdA) ( email )

Via Donizzatti 38
Milano, Mi 20122
Italy
+39 02 36683850 (Phone)

Davide Castellani

Henley Business School ( email )

Whiteknights
Reading, Berkshire RG6 6UD
United Kingdom

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