TY - UNPB
T1 - What Is a Foreign Firm?
T2 - Implications for Productivity Spillovers
AU - McGaughey, Sara L.
AU - Raimondos, Pascalis
AU - la Cour, Lisbeth
PY - 2018/6
Y1 - 2018/6
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.
AB - 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.
KW - Foreign direct investment
KW - Direct vs. ultimate owner
KW - Indirect ownership links
KW - Control vs. influence
KW - Productivity spillovers
KW - Foreign direct investment
KW - Direct vs. ultimate owner
KW - Indirect ownership links
KW - Control vs. influence
KW - Productivity spillovers
M3 - Working paper
T3 - Centre for Economic Policy Research. Discussion Papers
BT - What Is a Foreign Firm?
PB - Centre for Economic Policy Research
CY - London
ER -