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  3. American Economic Review
  4. December 2012
  5. Innovation and Foreign Ownership

Innovation and Foreign Ownership

  • Maria Guadalupe
  • Olga Kuzmina
  • Catherine Thomas
American Economic Review
vol. 102, no. 7, December 2012
(pp. 3594-3627)
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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.

Citation

Guadalupe, Maria, Olga Kuzmina, and Catherine Thomas. 2012. "Innovation and Foreign Ownership." American Economic Review, 102 (7): 3594-3627. DOI: 10.1257/aer.102.7.3594

Additional Materials

JEL Classification

  • D22 Firm Behavior: Empirical Analysis
  • D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • F23 Multinational Firms; International Business
  • G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
  • L60 Industry Studies: Manufacturing: General
  • O31 Innovation and Invention: Processes and Incentives