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)
Highlights
In 2007-2008, the world economy entered the deepest ...nancial crisis since World War II
To shed light on why foreign ownership could lead to divergent performance between multinational corporation (MNC) subsidiaries and local competitors during the Global Financial Crisis, we explore two distinct aspects of foreign ownership that have been highlighted in the theoretical literature of multinational ...rms
We investigate in this paper the role of foreign ownership in establishment performance during the recent Global Financial Crisis
Summary
In 2007-2008, the world economy entered the deepest ...nancial crisis since World War II. The comparison helps us identify the e¤ects of foreign ownership that are exclusive to crises periods and the unique role of production and ...nancial linkages in lending MNC subsidiaries greater resilience to negative demand and ...nancial shocks. We show that establishments sharing stronger vertical production linkages with foreign parent ...rms exhibited more resilient performance during the crisis, especially in host countries with greater negative demand shocks. Similar to production linkages, ...nancial linkages are not found to exert a signi...cant e¤ect on establishment performance in the non-crisis period These results suggest that the linkages between foreign subsidiaries and parent ...rms play an important role in establishments’ resilience to economic crises, but not necessarily in their growth in normal economic time.
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