Scandinavian Working Papers in Economics

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

No 69: Does Ownership Matter? The Impact of Foreign Takeovers on Innovation and Productivity Performance

Bernd Ebersberger (), Börje Johansson () and Hans Lööf ()
Additional contact information
Bernd Ebersberger: Fraunhofer Institute for Systems and Innovation Research, Postal: Breslauer Str.48, D-76139 Karlsruhe, Germany.
Börje Johansson: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Hans Lööf: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: Recent debate has focused on how foreign direct investments and foreign take-overs may effect growth and welfare. In this study we have methodologically approximated foreign-ownership by foreign take-over and raised the question: how would a firm’s behaviour and performance have been if a foreign owner had not acquired the firm? The analysis is based on a sample of 5 186 firm-level observations in four Nordic countries, of which approximately 30 percent of the firms have foreign owners. The econometric design helps us to establish some new findings. First, no robust difference in the propensity to be innovative can be established. Second, among the group of innovative firms, foreign-owned multinationals are generally outperformed by domestic multinationals in R&D and innovation engagement. Finally, the results on labor productivity are at variance with the findings in a large number of previous comparison studies. We find that foreign take-over of firms are neutral with respect to labor productivity, and hence the issue of welfare gain and welfare drain is turned into a non-issue.

Keywords: Multinational enterprises; Take-Over; Corporate governance; Cross-country comparison; Spillovers; R&D; Innovation; Productivity

JEL-codes: C31; D21; F23; G34; L22; O31; O33

35 pages, May 31, 2006

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