Perfomance of Foreign Affiliates in the Netherlands: A comparison with their domestic counterparts based on official microdata of Statistics Netherlands

Linda Bruls

Student thesis: Master thesis

Abstract

This paper seeks to investigate whether or not foreign affiliates operating in the business economy in the Netherlands perform different from domestically controlled enterprises after important firm-specific characteristics have been controlled for. It is based on official microdata of the Foreign Affiliates Statistics (FATS) for the years 2008-2011, provided by Statistics Netherlands. A set of four different performance measures (i.e., apparent labour productivity, wage-adjusted labour productivity, wage per capita and return on sales) is first analysed in an unconditional mean comparison, and subsequently in a year-by-year crosssectional regression analysis by means of an ordinary least squares (OLS) model. In the regressions foreign affiliates are compared not only with all types of domestically controlled enterprises, but also with a matched sample of domestic firms (to attempt to address the possibility of non-random assignment of foreign control to certain enterprises) and with a control group consisting of only domestic multinational enterprises (to consider multinationality of an enterprise as the driving force behind any performance differences instead of foreignness per se). This paper demonstrates that foreign-controlled enterprises can be associated with firm performance that is different from their domestic counterparts. In particular, the analysis reveals a productivity premium for foreign affiliates in the Netherlands, finds a wage gap that is also in favour of foreign affiliates and shows that there is no significant difference between foreign affiliates and domestically controlled enterprises in terms of profitability. Furthermore, it shows that most performance gaps significantly reduce or disappear altogether when foreign affiliates are compared with only domestic multinational enterprises instead of all types of domestic firms. These results are confirmed by a random effects model in which all four cross-sections are combined into a single panel.

EducationsMSc in Advanced Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2014
Number of pages76