IDEAS home Printed from https://ideas.repec.org/a/bla/reviec/v31y2023i4p1222-1245.html
   My bibliography  Save this article

Productivity premium of multinationals in global ownership linkages: A comparison of second‐tier subsidiaries

Author

Listed:
  • Eiichi Tomiura
  • Hiroshi Kumanomido

Abstract

High productivity of foreign direct investment (FDI) firms is a stylized fact. However, in the real world, there are subsidiaries owned by foreign parents but establishing their own foreign subsidiaries. Based on global ownership linkage data, we compare productivity levels of subsidiaries owned by parents in G‐7 countries but located worldwide. The FDI productivity premium is on average significantly small if investing firms are owned by foreign parents. Among firms with subsidiaries, the foreign ownership tends to reduce the FDI premium more when firms depend more on intangibles. This suggests that knowledge transfers within multinationals facilitate subsidiaries to make their own FDI.

Suggested Citation

  • Eiichi Tomiura & Hiroshi Kumanomido, 2023. "Productivity premium of multinationals in global ownership linkages: A comparison of second‐tier subsidiaries," Review of International Economics, Wiley Blackwell, vol. 31(4), pages 1222-1245, September.
    • Handle: RePEc:bla:reviec:v:31:y:2023:i:4:p:1222-1245
    DOI: 10.1111/roie.12661
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/roie.12661
    Download Restriction: no
    File URL: https://libkey.io/10.1111/roie.12661?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Armando Rungi & Gregory Morrison & Fabio Pammolli, 2017. "Global ownership and corporate control networks," Working Papers 07/2017, IMT School for Advanced Studies Lucca, revised Sep 2017.
    2. Fons-Rosen, Christian & Kalemli-Ozcan, Sebnem & Sørensen, Bent E. & Villegas-Sanchez, Carolina & Volosovych, Vadym, 2021. "Quantifying productivity gains from foreign investment," Journal of International Economics, Elsevier, vol. 131(C).
    3. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    4. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 577-598.
    5. Wolfgang Keller & Stephen Ross Yeaple, 2013. "The Gravity of Knowledge," American Economic Review, American Economic Association, vol. 103(4), pages 1414-1444, June.
    6. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    7. L. Kamran Bilir & Eduardo Morales, 2020. "Innovation in the Global Firm," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1566-1625.
    8. Alfonso Irarrazabal & Andreas Moxnes & Luca David Opromolla, 2013. "The Margins of Multinational Production and the Role of Intrafirm Trade," Journal of Political Economy, University of Chicago Press, vol. 121(1), pages 74-126.
    9. Girma, Sourafel & Gorg, Holger & Strobl, Eric, 2004. "Exports, international investment, and plant performance: evidence from a non-parametric test," Economics Letters, Elsevier, vol. 83(3), pages 317-324, June.
    10. David L. Carr & James R. Markusen & Keith E. Maskus, 2021. "Estimating The Knowledge-Capital Model of the Multinational Enterprise," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 5, pages 95-110, World Scientific Publishing Co. Pte. Ltd..
    11. Maria Guadalupe & Olga Kuzmina & Catherine Thomas, 2012. "Innovation and Foreign Ownership," American Economic Review, American Economic Association, vol. 102(7), pages 3594-3627, December.
    12. Ioannis Bournakis & Sotiris Papaioannou & Marina Papanastassiou, 2022. "Multinationals and domestic total factor productivity: Competition effects, knowledge spillovers and foreign ownership," The World Economy, Wiley Blackwell, vol. 45(12), pages 3715-3750, December.
    13. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    14. Rachel Griffith & Jonathan Haskel & Andy Neely, 2006. "Why is Productivity so Dispersed?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(4), pages 513-525, Winter.
    15. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    16. Chaney, Thomas, 2016. "Liquidity constrained exporters," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 141-154.
    17. Kalina Manova & Shang-Jin Wei & Zhiwei Zhang, 2015. "Firm Exports and Multinational Activity Under Credit Constraints," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 574-588, July.
    18. David J. Teece, 2008. "Technology Transfer By Multinational Firms: The Resource Cost Of Transferring Technological Know-How," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 1, pages 1-22, World Scientific Publishing Co. Pte. Ltd..
    19. repec:spo:wpmain:info:hdl:2441/5g3sadr9h8gbri8hrtq0h6au2 is not listed on IDEAS
    20. Carol Corrado & Jonathan Haskel & Cecilia Jona-Lasinio & Massimiliano Iommi, 2022. "Intangible Capital and Modern Economies," Journal of Economic Perspectives, American Economic Association, vol. 36(3), pages 3-28, Summer.
    21. repec:hal:spmain:info:hdl:2441/5g3sadr9h8gbri8hrtq0h6au2 is not listed on IDEAS
    22. Claudia Buch & Iris Kesternich & Alexander Lipponer & Monika Schnitzer, 2014. "Financial constraints and foreign direct investment: firm-level evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(2), pages 393-420, May.
    23. Marcus Biermann, 2022. "The role of management practices in acquisitions and the FDI location decision," Review of International Economics, Wiley Blackwell, vol. 30(1), pages 137-165, February.
    24. Tomiura, Eiichi, 2007. "Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm level," Journal of International Economics, Elsevier, vol. 72(1), pages 113-127, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Antrà s, Pol & Yeaple, Stephen R., 2014. "Multinational Firms and the Structure of International Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 55-130, Elsevier.
    2. Anna Gumpert, 2018. "The Organization of Knowledge in Multinational Firms," Journal of the European Economic Association, European Economic Association, vol. 16(6), pages 1929-1976.
    3. Bahar, Dany, 2020. "The hardships of long distance relationships: time zone proximity and the location of MNC's knowledge-intensive activities," Journal of International Economics, Elsevier, vol. 125(C).
    4. Laura Alfaro & Maggie X. Chen, 2013. "Market Reallocation and Knowledge Spillover: The Gains from Multinational Production," Working Papers 2013-13, The George Washington University, Institute for International Economic Policy.
    5. Chen, Maggie Xiaoyang & Moore, Michael O., 2010. "Location decision of heterogeneous multinational firms," Journal of International Economics, Elsevier, vol. 80(2), pages 188-199, March.
    6. Okubo, Toshihiro & Watabe, Yuta, 2023. "Networked FDI and third-country intra-firm trade," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 591-606.
    7. Dany Bahar, 2017. "The Hardships of Long Distance Relationships: Knowledge Transmission and the Ease of Communication within Multinational Firms," Growth Lab Working Papers 102, Harvard's Growth Lab.
    8. repec:zbw:rwirep:0259 is not listed on IDEAS
    9. Stiebale, Joel & Vencappa, Dev, 2018. "Acquisitions, markups, efficiency, and product quality: Evidence from India," Journal of International Economics, Elsevier, vol. 112(C), pages 70-87.
    10. Laura Alfaro & Maggie Xiaoyang Chen, 2018. "Transportation cost and the geography of foreign investment," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 12, pages 369-406, Edward Elgar Publishing.
    11. Michaela Trax, 2011. "Productivity and the Internationalization of Firms – Cross-border Acquisitions versus Greenfield Investments," Ruhr Economic Papers 0259, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    12. Bruno Merlevede & Victoria Purice, 2019. "Border Regimes And Indirect Productivity Effects From Foreign Direct Investment," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 19/965, Ghent University, Faculty of Economics and Business Administration.
    13. Wolfgang Keller & Stephen R. Yeaple, 2008. "Global Production and Trade in the Knowledge Economy," NBER Working Papers 14626, National Bureau of Economic Research, Inc.
    14. Nasini, Stefano & Verschelde, Marijn & Merlevede, Bruno, 2024. "Optimal transfer prices and technology in decentralized business groups," European Journal of Operational Research, Elsevier, vol. 319(3), pages 920-942.
    15. Trax, Michaela, 2011. "Productivity and the Internationalization of Firms – Cross-border Acquisitions versus Greenfield Investments," Ruhr Economic Papers 259, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    16. Chen, Maggie Xiaoyang & Lin, Chuanhao, 2020. "Geographic connectivity and cross-border investment: The Belts, Roads and Skies," Journal of Development Economics, Elsevier, vol. 146(C).
    17. Maemir, H. & Ziesemer, T., 2014. "Multinational production and trade in an endogenous growth model with heterogeneous firms," MERIT Working Papers 2014-038, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    18. Cozza, Claudio & Perani, Giulio & Zanfei, Antonello, 2016. "Are multinationals better at creating technical linkages with local firms?," Papers in Innovation Studies 2016/14, Lund University, CIRCLE - Centre for Innovation Research.
    19. Bricongne, Jean-Charles & Delpeuch, Samuel & Lopez-Forero, Margarita, 2023. "Productivity slowdown and tax havens: Where is measured value creation?," Journal of International Economics, Elsevier, vol. 143(C).
    20. Carlo Altomonte & Tommaso Aquilante & Gábor Békés & Gianmarco I.P. Ottaviano, 2013. "Internationalization and innovation of firms: evidence and policy [Managing knowledge within and outside the multinational corporation]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 28(76), pages 663-700.
    21. Cathy Ge Bao & Maggie Xiaoyang Chen, 2018. "Foreign Rivals Are Coming to Town: Responding to the Threat of Foreign Multinational Entry," American Economic Journal: Applied Economics, American Economic Association, vol. 10(4), pages 120-157, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:31:y:2023:i:4:p:1222-1245. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.