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CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 381:
Outward FDI and company performance in CEECs

Jože Damijan (), Crt Kostevc () and Matija Rojec ()

Abstract: Using a large sample of micro data we investigate what kind of CEECs-9 (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Poland, Romania, Slovakia and Slovenia) firms tend to invest abroad, and what is the impact of outward FDI on their productivity. We find that firms with outward FDI tend to be larger and more productive, i.e. the best firms tend to self-select into outward FDI. There is also a positive effect of outward FDI on productivity growth of investing firms from CEECs, but this effect is driven exclusively by the subsamples of Czech and Romanian firms, while the impact in other countries is substantially less pronounced. In addition, the positive effect does not appear to be long lasting as it is only statistically significant a year after the investment was made, while employing longer lags yielded positive but insignificant correlations. We also find the heterogeneity of effects by different host-country markets, i.e. investments by CEECs firms into either Western European or other CEECs yielded an above average effect on productivity growth of investing firms, investments into other parts of Europe did not significantly impact the growth of productivity, while North American subsidiaries were even negatively correlated with productivity growth.

Keywords: FDI; cross-country comparisons; emerging economies; productivity growth; micro-data; (follow links to similar papers)

JEL-Codes: C30; F23; O47; O57; (follow links to similar papers)

26 pages, October 24, 2014

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