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Multinational activity of European firms and heterogeneity
Author(s) -
Fariñas José C.,
MartínMarcos Ana,
Velázquez Francisco J.
Publication year - 2018
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.12613
Subject(s) - multinational corporation , subsidiary , contiguity , scope (computer science) , gravity model of trade , business , foreign direct investment , scale (ratio) , industrial organization , economics , international trade , international economics , economic geography , macroeconomics , finance , ecology , physics , quantum mechanics , computer science , biology , programming language
This paper offers an empirical assessment of the multinational activity of European firms. It takes the predictions of models of firm heterogeneity and FDI activity as a reference to explore the characteristics of multinational firms from 30 European countries. We use a data set, based on ORBIS, which links information of parent–affiliate pairs of firms. Our results show that more productive firms have greater multinational activity in terms of both scope, the number of foreign markets where they invest, and scale, the volume of local sales by subsidiaries active in foreign markets. The estimation of gravity equations shows that country characteristics that encourage multinational activity successively induce the entry of less productive parent firms. We confirm this asymmetry for the GDPs of the home and host countries, distance, contiguity and other standard gravity equation variables.