Innovation and Foreign Ownership
Maria Guadalupe, Olga Kuzmina, Catherine Thomas
American Economic Review · 2012 · Volume 102 · Issue 7
Abstract
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.
Keywords
Firm Behavior: Empirical Analysis, Production, Cost, Capital, Total Factor, and Multifactor Productivity, Capacity, Multinational Firms, International Business, Mergers, Acquisitions, Restructuring, Voting, Proxy Contests, Corporate Governance, Industry Studies: Manufacturing: General, Innovation and Invention: Processes and Incentives
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