Abstract
Using Swedish microdata, we find no evidence for the concerns circulating in the public debate that foreign acquisitions lead to reductions in both R&D expenditures and high-skilled activities in targeted domestic firms for either MNEs or non-MNEs. Previous studies have only focused on larger firms. In this paper, we are able to study the impact on smaller firms (fewer than 50 employees), which is important because 90% of the firms acquired by foreign enterprises meet this criterion. For this group of firms, there is no information on R&D, but by using the register of educational attainment, we obtain data on the share of high-skilled labour in all Swedish firms, irrespective of size. Interestingly, we find that among smaller firms, foreign enterprises tend to acquire high-productive, skill-intensive firms (cherry-picking). After the acquisitions, skill upgrading appears in acquired smaller, non-MNE firms, particularly in the service sector.
Highlights
In the late 1990s, foreign ownership increased quite dramatically in the Swedish business sector
research and development (R&D) intensity is defined as R&D expenditure as a share of firm sales; skill intensity is measured by the proportion of employees with 3 years or more of post-secondary education (ISCED 6–8); labour productivity is defined as value added in SEK 1000 per employee; capital intensity is measured by the book value of machinery and buildings in SEK 1000 per employee; size is measured by the number of employees; age is defined as the number of years since the firm first became registered; Swedish multinational enterprises (MNEs) is a dummy variable indicating whether a firm is part of a Swedish MNE; and foreign presence is defined as the share of employment in foreign firms relative to total employment in an industry
The impact of foreign acquisitions on R&D and other high-skilled activities in MNEs and larger firms has been the subject of several studies, but the effect on skill upgrading in smaller, non-MNE firms has been less explored
Summary
In the late 1990s, foreign ownership increased quite dramatically in the Swedish business sector. Many of the concerns in the Swedish public debate have been about how large Swedish MNEs are affected when they become foreign owned In both the public debate and in the academic literature, less interest has been directed towards the impact of foreign acquisitions on smaller firms, and such firms are quite often nonMNEs. An advantage with using the share of highly skilled labour instead of R&D expenditure as an outcome variable is that we have access to data for all firms and for every single year for the entire Swedish business sector without constraint on firm size. We find, in contrast to Bertrand (2009) and Bandick et al (2014), no effect of foreign acquisitions on R&D in targeted firms, neither in MNEs nor in non-MNEs. In contrast, in small, non-MNEs, in the service sector, the share of highly skilled labour increases in firms acquired by foreign enterprises.
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