Domestically-owned Firms Research Articles

The diffusion of exporting in Brazilian industrial clusters

The present research aimed at understanding the process by which firms in a cluster start to export based on systemic interactions, and the process of diffusion of exporting as a business strategy within the cluster. Diffusion was defined, following Rogers’ (1995: 5) seminal work, as ‘the process by which an innovation is communicated through certain channels over time among the members of a social system’. The research method used was industry case studies and the unit of analysis selected was the cluster. Two manufacturing industries were chosen to be investigated, and within each geographic area clusters were identified as the origin of dynamic export growth in the industry. Players in each industrial cluster, as well as other significant actors, were interviewed. Extensive secondary data research was done to study clusters’ historical development. Detailed analysis and a comparison of the experiences permitted the extraction of some general conclusions concerning the similarities and differences between the clusters in terms of the adoption and diffusion of exporting. Results showed that the diffusion of exporting in an industrial cluster is quite similar to the dissemination of technical innovation. Social ties were important to facilitate the diffusion of exporting in one of the clusters studied. Also, the role of domestically-owned flagship firms in leading the internationalization process proved to be important in only one of the clusters, while the role of external actors was fully supported in the two industries studied. Finally, a number of support institutions, private and public, interfered in different stages of the internationalization process. In both industries, the federal government had only a late and limited impact on export initiation and development.

Does Foreign Ownership Improve Firm Performance?

The consensus in the literature is that foreign-owned firms perform better than domestic-owned firms. It is less clear if this perceived difference is due to foreign companies investing in the best domestic firms or to an improvement in operating performance following the foreign investment event. This paper uses firm-level micro data from India to study the direct impact of foreign ownership on firm productivity. To control for the endogeneity of the foreign investment decision, this study implements a difference-in-differences matching estimator using two alternative approaches to assigning a counterfactual time of foreign investment to firms in the control group. Alternative definitions of Foreign Direct Investment (FDI) are also explored. There is no significant difference in the performance of foreigninvested versus non-invested firms over the short run, but there is evidence of a productivity improvement for foreign-invested firms over a longer time horizon. Conversely, foreign divestitures do not lead to significant differences in operating performance between foreign-divested firms and firms that remain foreign-invested.

Productivity, Ownership & National Chains: Evidence from the British Retail Sector

This paper investigates whether foreign-owned retailers operating in the British retail sector perform differently than domestic-owned firms with diverse national presence. Using simultaneous quantile regression techniques we test for any sign of performance gaps. The findings suggest that foreign ownership turns out to be a weak explanatory factor of differences in performance across retailers. Only when firms in the upper quantiles of TFP are compared, the role of foreign ownership gains statistical significance, although with exceptions. On the other hand, firms able to expand their infrastructure across Great Britain possess a productivity advantage over more local retailers. This implies that the existence of a national network of stores may be more important than the origin of ownership.

Intra-Industry Knowledge Spillovers from Foreign Direct Investment in R&D: Evidence from a Chinese Science Park

This study examines whether foreign direct investment generates intra-industry knowledge spillovers to domestically-owned firms, using firm-level panel data from a Chinese science park. Our analysis suggests that the R&D stock of foreign-owned firms has a positive effect on the productivity of domestic firms in the same industry, while the capital stock of foreign firms has no such effect. These results suggest that foreign firms' knowledge spills over within industries through their R&D activities, but not through their production activities. In addition, we find no evidence of spillovers from domestic firms or firms from Hong Kong, Macau, or Taiwan, suggesting that the size of knowledge spillovers is larger when the technology gap between source and recipient firms is larger.

Entrepreneurship and Industrial Re-Structuring: What Kinds of Start-Ups Matter Most for Job Creation

We examine the effects of new business formation in a region on subsequent employment growth in that region, observing in particular the effects of different kinds of start-ups on employment change, and the lag structure of these effects. The study partitions entry rates into entry by large and small firms; foreign-owned and domestic-owned firms; and knowledge-based and other firms. In all cases results suggest that effects on new firm formation on subsequent employment change are different according to the type of entrant. Start-ups that are larger, foreign-owned and/or knowledge-based have considerably stronger effects on industrial re-structuring and employment change, whether due to market selection processes or supply-side spillovers. This finding has important implications for entrepreneurship policies at the regional and national levels.

Corporate Performance: Does Ownership Matter? A Comparison of Foreign- and Domestic-Owned Firms in Greece and Portugal

The paper investigates whether multinational corporations (MNCs) operating in Portugal and Greece perform differently than domestic firms. Departures from normality of firms’ profitability motivated the use of quantile regression. The results suggest that ownership ties do not make a significant difference with respect to performance of firms in Portugal. Results are similar for firms in Greece. Only when firms in the upper quantiles of gross profits are compared, MNCs are found to significantly perform better than domestic firms. MNCs have to compensate for their liability of foreigness that in spite of their technological advantages they cannot persistently outperform domestic rivals.

Do out-in M&As bring higher TFP to Japan? An empirical analysis based on micro-data on Japanese manufacturing firms

This paper compares the performance of foreign-owned and domestically-owned firms, using micro-data on Japanese firms in the manufacturing sector for the period 1994–2000. The overall comparison between foreign-owned and Japanese companies shows that foreign-owned companies enjoyed 5% higher TFP as well as higher earnings and returns on capital. They also displayed a higher capital–labor ratio and higher R&D intensity. Reflecting their higher TFP and labor-saving production patterns, foreign-owned companies showed higher labor productivity and wage rates as well. By estimating probit models, we found that foreign firms acquire Japanese firms with higher TFP levels and higher profit rates. In contrast, in-in M&As seem to have the characteristics of rescue missions. Small firms with a higher total liability/total asset ratio tend to be chosen as targets of in-in M&As. We also estimated the dynamic effects of M&As on target firms. The results indicate that out-in M&As improve target firms' TFP level and current profit/sales ratio. Compared with in-in M&As, out-in M&As bring a larger and quicker improvement in TFP and the profit rate but no increase in target firms' employment two years after the acquisition. J. Japanese Int. Economies 19 (2) (2005) 272–301.

Is There Really a Foreign Ownership Wage Premium? Evidence from Matched Employer-Employee Data

Numerous studies on firm-level data have reported higher average wages in foreign-owned firms than in domestically-owned firms. This, however, does not necessarily imply that the individual worker’s wage increase with foreign ownership. Using detailed matched employer-employee data on the entire Swedish private sector, we examine the effect of foreign ownership on individual wages, controlling for individual and firm heterogeneity as well as for possible selection bias in foreign acquisitions. We distinguish between foreign greenfields and takeovers and compare foreign owned firms with both domestic multinationals and local firms. Our results show a considerably smaller wage premium in foreign owned firms than what has been found in studies conducted at a more aggregate level. Moreover, foreign takeovers of Swedish firms tend to have no or even a negative effect on wages.

The use of expatriates and inpatriates in Central and Eastern Europe since the Wall came down

This study reports the results of interviews with key officials of 46 Western European and American multinational subsidiaries and joint ventures in the Czech Republic, Poland, Hungary, Bulgaria and Romania. The focus of our questions related to the role of expatriates in their operation, strengths and weaknesses of the local staff, and some miscellaneous issues. We found that the key human resource role of the multinational was to expose the local staff to a market economy; to instill world standards of performance; and provide training and functional expertise. Questions are raised as to whether this set of knowledge, skills and expectations can be spread beyond the multinationals to domestic-owned firms and state enterprises. Comparisons and contrasts were also made with the multinationals’ experience in other parts of the world. Finally, four propositions were advanced for future testing.

Strategic Policy Towards Multinationals for Oligopolistic Industries

The author considers an environment with two firms, one domestically owned and one a foreign‐owned multinational corporation (MNC), both producing in the host (domestic) country. It is found that there are three distinct dimensions that affect a country’s strategic policy towards domestically‐owned firms and foreign‐owned firms: the number of policy instruments available to the host government (whether or not it can tax/subsidize both types of firms), the location of the market (in the host country or a third country), and the extent of spillover of the foreign‐owned firms’ production.

Multinational firms and export performance in developing countries: Some analytical issues and new empirical evidence

In a given developing-country environment, are the affiliates of MNEs more export oriented than wholly domestic-owned firms? No clear conclusions emerge from the theoretical models or the few available empirical studies of this issue. This paper draws attention to methodological flaws of these studies and presents new empirical evidence through the application of a more appropriate econometric procedure to data from Sri Lanka. We find no significant relationship between MNE affiliation and the degree of export orientation of exporting firms. On the other hand, there is evidence that multinational affiliation is an important determinant of whether a firm is an exporter or not.

The Multinational Enterprise and Restrictive Conditions in International Technology Transfer: Some New Australian Evidence

The paper reports the results of a survey of 393 Australian firms regarding their access to overseas-sourced technology and the extent and nature of restrictions attached to technology transfer. The results suggest that Australian firms are not generally subject to widespread binding restrictions attached to technology sourced from overseas. Furthermore, with the exception of restrictions on technology re-licensing, there is no significant difference between foreign- and domestically-owned firms in the incidence of restrictions. THIS NOTE reports the results of a survey of 393 Australian firms, both domestic and foreign-owned enterprises in the manufacturing, mining and construction sectors, regarding their access to overseas technology and the extent and nature of restrictions attached to technology transfer. Information was obtained on the access to overseas technology by a sample of innovating companies in Australian industry. The information covers the extent of general access to overseas-sourced know-how and the importance of restrictions attached to overseas-sourced know-how. The sample includes subsidiaries of foreign firms (based on a specified definition of an overseas controlling interest) as well as domestically-owned firms. Details of the sample are set out in the Appendix.

Transnational corporations and the political economy of export promotion: the case of the Mexican automobile industry

Export promotion has replaced import substitution as the orthodox strategy for economic development. In sectors dominated by transnational corporations, however, such a strategy may run afoul of difficulties not immediately apparent from the neo-classical comparative-advantage perspective that has provided its principal theoretical support. Evidence from the Mexican automobile industry shows that an export promotion policy may face problems of a) demand rigidities in TNC intracompany transfers, b) decision dependency, c) difficulties in enforcing sanctions in cases of recalcitrance, and d) an unequal distribution of benefits between foreign-owned and domestically-owned firms.

Foreign Ownership and Export Performance

This article reports the results of an empirical study which tended to disprove the hypothesis that foreign-owned subsidiaries are less export oriented than domestically-owned firms.