Ownership Structure and Productivity of Multinationals

We examine the ownership structure and productivity of multinational affiliates and their effects on domestic industry. We first separate plant-level efficiency into a physical productivity and a price component. Multinationals target plants with high prices and markups. Upon acquisition they raise physical productivity but lower prices, leaving markups unchanged, especially when they are majority owners. This pro-competitive effect means that multinationals' productivity effects may be previously under-estimated. Multinational presence in an industry increases physical productivity while lowering prices at domestic firms, especially when majority-owned affiliates are present. Ownership structure and foreign acquisitions therefore play an important role in driving aggregate productivity growth.