Innovation and Foreign Ownership | Zendy

María Guadalupe | Zendy; Olga Kuzmina | Zendy; Catherine Thomas | Zendy

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Innovation and Foreign Ownership

Author(s) -

María Guadalupe,

Olga Kuzmina,

Catherine Thomas

Publication year - 2012

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.102.7.3594

Subject(s) - multinational corporation , productivity , industrial organization , selection (genetic algorithm) , foreign ownership , product (mathematics) , economics , panel data , product innovation , propensity score matching , scale (ratio) , business , process (computing) , microeconomics , econometrics , computer science , foreign direct investment , macroeconomics , finance , statistics , physics , geometry , mathematics , quantum mechanics , artificial intelligence , operating system

This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that explains both the observed selection patterns and the innovation decisions. Further, we show in the data that innovation upon acquisition is associated with the increased market scale provided by the parent firm

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