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Nationality Matters: The Geographic Origin of Multinationals and the Productivity of their Foreign Affiliates

Author

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  • Christian Arndt
  • Julia Spies

Abstract

While quantifying the foreign ownership premium has received a lot of attention in the empirical literature, there is only little known about productivity variations between foreign affiliates of multinational firms. In order to enhance the understanding of the economic causes of this heterogeneity we analyze the impact of various institutional and economic characteristics of the countries in which the multinational parent companies are located on the productivity of their affiliates. Using a full record of the population of foreignowned affiliates in Germany we find that affiliates’ mean performances differ markedly when grouped by the country of their parent firm. We show that gravitational forces and institutional characteristics of the country of the parent, such as the availability of credit and the freedom to trade internationally, co-determine the foreign-owned affiliates’ performances in a significant way. Moreover, the intensity of the impact depends on the intensity of the ownership link between the parent and its affiliate. Some residual impact of nationality remains.

Suggested Citation

  • Christian Arndt & Julia Spies, 2012. "Nationality Matters: The Geographic Origin of Multinationals and the Productivity of their Foreign Affiliates," IAW Discussion Papers 79, Institut für Angewandte Wirtschaftsforschung (IAW).
    • Handle: RePEc:iaw:iawdip:79
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    File URL: http://www.iaw.edu/RePEc/iaw/pdf/iaw_dp_79.pdf
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    Citations

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    Cited by:

    1. Sanfilippo, Marco, 2013. "Investing abroad from the bottom of the productivity ladder : BRICS multinationals in Europe," BOFIT Discussion Papers 26/2013, Bank of Finland, Institute for Economies in Transition.
    2. Li, Chen, 2016. "Signing a Bilateral Investment Treaty - A tradeoff between investment protection and regulation," VfS Annual Conference 2016 (Augsburg): Demographic Change 145505, Verein für Socialpolitik / German Economic Association.
    3. repec:zbw:bofitp:2013_026 is not listed on IDEAS
    4. Sanfilippo, Marco, 2013. "Investing abroad from the bottom of the productivity ladder: BRICS multinationals in Europe," BOFIT Discussion Papers 26/2013, Bank of Finland Institute for Emerging Economies (BOFIT).

    More about this item

    Keywords

    foreign direct investment & productivity spillover & investor country characteristics;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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