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Home Firm Performance After Foreign Investments and Divestitures
Author(s) -
Engel Dirk,
Procher Vivien
Publication year - 2013
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12068
Subject(s) - divestment , foreign direct investment , export performance , economics , propensity score matching , investment (military) , matching (statistics) , business , industrial organization , monetary economics , international economics , macroeconomics , finance , statistics , mathematics , politics , political science , law
An almost undisputed aim for firms in today's globalised world is to operate internationally. Several papers find a positive relationship between foreign direct investment ( FDI ) and the domestic performance of firms. In this paper, we address the ‘ FDI – export’ relationship to better understand this trend. Furthermore, by presenting results on firm's post‐divestiture employment growth at home, we are able to provide a more comprehensive view on firm performance after stepping in and out of foreign markets. We apply a propensity score matching technique in combination with a difference‐in‐difference estimator to analyse the performance dynamics of F rench firms that either invested abroad or carried out foreign divestitures during the period 2000–2007. FDI has, on average, a positive effect in terms of export share, operating turnover and employment in firm's domestic market. Industry differences reveal that firms in high‐tech industries experience a strong increase in their domestic performance, whereas firm performance in low‐tech industries increases only moderately in post‐investment periods. In contrast, the divestiture impact on the post‐divestiture performance is rather negligible.