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Innovation and Foreign Ownership

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  • Maria Guadalupe
  • Olga Kuzmina
  • Catherine Thomas

Abstract

This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that jointly explains the observed selection process and the innovation decisions. Further, we show in the data that innovation on acquisition is associated with the increased market scale provided by the parent firm.

Suggested Citation

  • Maria Guadalupe & Olga Kuzmina & Catherine Thomas, 2010. "Innovation and Foreign Ownership," NBER Working Papers 16573, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16573
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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