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Innovation and foreign ownership

Guadalupe, Maria, Kuzmina, Olga and Thomas, Catherine ORCID: 0000-0002-7783-9758 (2012) Innovation and foreign ownership. American Economic Review, 102 (7). pp. 3594-3627. ISSN 0002-8282

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Identification Number: 10.1257/aer.102.7.3594


This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that explains both the observed selection patterns and the innovation decisions. Further, we show in the data that innovation upon acquisition is associated with the increased market scale provided by the parent firm.

Item Type: Article
Official URL:
Additional Information: © 2012 America Economic Association
Divisions: Management
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
JEL classification: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior
D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives
Date Deposited: 20 Feb 2013 16:44
Last Modified: 18 Jun 2024 19:18

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