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Multinational activity of European firms and heterogeneity

Author

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  • José C. Fariñas
  • Ana Martín†Marcos
  • Francisco J. Velázquez

Abstract

This paper offers an empirical assessment of the multinational activity of European firms. It takes the predictions of models of firm heterogeneity and FDI activity as a reference to explore the characteristics of multinational firms from 30 European countries. We use a data set, based on ORBIS, which links information of parent–affiliate pairs of firms. Our results show that more productive firms have greater multinational activity in terms of both scope, the number of foreign markets where they invest, and scale, the volume of local sales by subsidiaries active in foreign markets. The estimation of gravity equations shows that country characteristics that encourage multinational activity successively induce the entry of less productive parent firms. We confirm this asymmetry for the GDPs of the home and host countries, distance, contiguity and other standard gravity equation variables.

Suggested Citation

  • José C. Fariñas & Ana Martín†Marcos & Francisco J. Velázquez, 2018. "Multinational activity of European firms and heterogeneity," The World Economy, Wiley Blackwell, vol. 41(5), pages 1166-1195, May.
    • Handle: RePEc:bla:worlde:v:41:y:2018:i:5:p:1166-1195
    DOI: 10.1111/twec.12613
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    Cited by:

    1. Andre Jungmittag, 2019. "Service trade restrictiveness and internationalisation of retail trade," International Economics and Economic Policy, Springer, vol. 16(2), pages 293-333, April.
    2. José Manuel Mansilla-Fernández & Juliette Milgram-Baleix, 2023. "Working capital management, financial constraints and exports: evidence from European and US manufacturers," Empirical Economics, Springer, vol. 64(4), pages 1769-1810, April.
    3. Fariñas, José C. & Martín-Marcos, Ana & Velázquez, Francisco J., 2019. "Estimating the Scope Elasticity of Multinational Firms: An Empirical Assessment," MPRA Paper 94990, University Library of Munich, Germany.
    4. José C. Fariñas & Ana Martín-Marcos & Francisco J. Velázquez, 2021. "The Geographical Scope of Multinational Firms and Heterogeneity," Open Economies Review, Springer, vol. 32(4), pages 761-788, September.

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