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Foreign Ownership and Productivity: is the Direction of Causality so Obvious?

Author

Listed:
  • Luigi Benfratello

    (Ceris-Cnr)

  • Alessandro Sembenelli

    (University of Torino)

Abstract
No abstract is available for this item.

Suggested Citation

  • Luigi Benfratello & Alessandro Sembenelli, 2002. "Foreign Ownership and Productivity: is the Direction of Causality so Obvious?," Development Working Papers 166, Centro Studi Luca d'Agliano, University of Milano.
    • Handle: RePEc:csl:devewp:166
    Note: The purpose of this paper is to estimate the e¤ect of foreign ownership on productivity under reasonable identification assumptions. In particular we estimate dynamic Cobb-Douglas production functions augmented with a set of variables capturing complementary characteristics of foreign ownership. We apply the GMM- System estimator developed by Blundell and Bond (1998) to a large sample of firms located in Italy. Our aggregate findings suggest that after controlling for unobserved heterogeneity, simultaneity and measurement errors, foreign ownership has no effect on productivity. Therefore we do not find widespread empirical support to the standard internalization theory of foreign direct investment. However, we also find that nationality matters since firms under US ownership tend to be more productive than firms under national ownership. In turn this additional result suggests that the transfer of knowledge implied by the internalization theory occurs only if the difference between the recipient and the investment country is suffciently pronounced.
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    References listed on IDEAS

    as
    1. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
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    3. Rachel Griffith, 1999. "Using the ARD establishment level data to look at foreign ownership and productivity in the UK," IFS Working Papers W99/06, Institute for Fiscal Studies.
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    9. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
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    More about this item

    Keywords

    multinational firms; total factor productivity; panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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