What Is a Foreign Firm?

Implications for Productivity Spillovers

Publikation: Working paperForskning

Resumé

When searching for productivity spillovers from foreign firms, a firm is typically classified as foreign using a low threshold of direct foreign ownership. Instead, we advocate an `ultimate owner' definition because (i) ultimate ownership includes indirect ownership links that are prevalent in our complex, interdependent world; and (ii) it confers control. Control brings greater willingness to transfer knowledge to foreign affiliates but, paradoxically, also greater potential for spillovers. Adopting this alternate definition of what is foreign turns out to be pivotal for identifying spillovers: while we find no horizontal productivity effects using the low threshold direct ownership definition, we find positive and significant effects under the ultimate-owner definition. Moreover, we find evidence that indirectly controlled foreign firms exert the most persistent horizontal spillovers to domestic firms.
OriginalsprogEngelsk
Udgivelses stedLondon
UdgiverCentre for Economic Policy Research
Antal sider45
StatusUdgivet - jun. 2018
NavnCentre for Economic Policy Research. Discussion Papers
NummerDP12978
ISSN0265-8003

Emneord

  • Foreign direct investment
  • Direct vs. ultimate owner
  • Indirect ownership links
  • Control vs. influence
  • Productivity spillovers

Citer dette

McGaughey, S. L., Raimondos, P., & la Cour, L. (2018). What Is a Foreign Firm? Implications for Productivity Spillovers. London: Centre for Economic Policy Research. Centre for Economic Policy Research. Discussion Papers, Nr. DP12978
McGaughey, Sara L. ; Raimondos, Pascalis ; la Cour, Lisbeth. / What Is a Foreign Firm? Implications for Productivity Spillovers. London : Centre for Economic Policy Research, 2018. (Centre for Economic Policy Research. Discussion Papers; Nr. DP12978).
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McGaughey, SL, Raimondos, P & la Cour, L 2018 'What Is a Foreign Firm? Implications for Productivity Spillovers' Centre for Economic Policy Research, London.

What Is a Foreign Firm? Implications for Productivity Spillovers. / McGaughey, Sara L.; Raimondos, Pascalis; la Cour, Lisbeth.

London : Centre for Economic Policy Research, 2018.

Publikation: Working paperForskning

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N2 - When searching for productivity spillovers from foreign firms, a firm is typically classified as foreign using a low threshold of direct foreign ownership. Instead, we advocate an `ultimate owner' definition because (i) ultimate ownership includes indirect ownership links that are prevalent in our complex, interdependent world; and (ii) it confers control. Control brings greater willingness to transfer knowledge to foreign affiliates but, paradoxically, also greater potential for spillovers. Adopting this alternate definition of what is foreign turns out to be pivotal for identifying spillovers: while we find no horizontal productivity effects using the low threshold direct ownership definition, we find positive and significant effects under the ultimate-owner definition. Moreover, we find evidence that indirectly controlled foreign firms exert the most persistent horizontal spillovers to domestic firms.

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McGaughey SL, Raimondos P, la Cour L. What Is a Foreign Firm? Implications for Productivity Spillovers. London: Centre for Economic Policy Research. 2018 jun.