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American Economic Journal: Economic Policy: Vol. 4 No. 3 (August 2012)

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Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance

Article Citation

Alfaro, Laura, and Maggie Xiaoyang Chen. 2012. "Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance." American Economic Journal: Economic Policy, 4(3): 30-55.

DOI: 10.1257/pol.4.3.30

Abstract

We examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that, first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in noncrisis years. (JEL F23, G01, L22, M16)

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Authors

Alfaro, Laura (Harvard U)
Chen, Maggie Xiaoyang (George Washington U)

JEL Classifications

F23: Multinational Firms; International Business
G01: Financial Crises
L22: Firm Organization and Market Structure
M16: International Business Administration

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