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Impact of Multinational Enterprises on Competition, Productivity and Trade Spillovers across European Firms

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  • Jan Hanousek

    (CERGE-EI, Charles University, Prague, Czech Republic
    Academy of Sciences, Prague, Czech Republic
    CEPR, London, Great Britain)

  • Evzen Kocenda

    (Charles University, Prague, Czech Republic
    Czech Academy of Sciences, Prague, Czech Republic
    CESifo, Munich, Germany
    IOS, Regensburg, Germany)

  • Pavla Vozárová

    (Czech Technical University in Prague, Czech Republic)

Abstract

We analyze the impact of multinational enterprises (MNEs), via their foreign direct investment, on domestic firms in 30 European host economies, from 2001 to 2013. We incorporate international industrial and trade linkages into a standard theoretical framework and test them empirically on a unique dataset compiled from the Amadeus, Eurostat, UNComtrade and BACI data sources, aggregated at industry level. While controlling for horizontal, vertical, and export channels at the upstream and downstream levels, we show that the presence of MNEs significantly affects domestic firms by changing the degree of competition and improving productivity. The impact is not always positive, as domestic firms are often crowded-out, but the negative effect for an average firm is mostly small.

Suggested Citation

  • Jan Hanousek & Evzen Kocenda & Pavla Vozárová, 2020. "Impact of Multinational Enterprises on Competition, Productivity and Trade Spillovers across European Firms," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 70(2), pages 172-212, August.
    • Handle: RePEc:fau:fauart:v:70:y:2020:i:2:p:172-212
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    More about this item

    Keywords

    multinational enterprise (MNE); foreign direct investment (FDI); European firms; spillovers; international trade;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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