Innovation and Foreign Ownership

Maria Guadalupe, Olga Kuzmina, Catherine Thomas

NBER Working Paper No. 16573
Issued in December 2010
NBER Program(s):The Industrial Organization Program, The International Trade and Investment Program, The Labor Studies Program, The Productivity, Innovation, and Entrepreneurship Program

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 jointly explains the observed selection process and the innovation decisions. Further, we show in the data that innovation on acquisition is associated with the increased market scale provided by the parent firm.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w16573

Published: Maria Guadalupe & Olga Kuzmina & Catherine Thomas, 2012. "Innovation and Foreign Ownership," American Economic Review, American Economic Association, vol. 102(7), pages 3594-3627, December. citation courtesy of

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