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Does Foreign Presence Stimulate Creative Destruction in Local Markets

Author

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  • Maliranta, Mika
  • Nurmi, Satu

Abstract

This paper studies the effect of foreign-owned companies (FOCs) in the region on establishment survival and growth in the Finnish business sector. We analyze whether the presence of the FOCs has asymmetric effects among the local businesses. Foreign presence in the region is measured in a novel way by using the regional links between establishments and their workers in the local labour markets. Evidence for small service establishments suggests that the presence of the FOCs contributes to aggregate productivity by cleansing inefficient units. The FOCs do not seem to stimulate productivity-enhancing restructuring among large, manufacturing or continuing establishments.

Suggested Citation

  • Maliranta, Mika & Nurmi, Satu, 2007. "Does Foreign Presence Stimulate Creative Destruction in Local Markets," Discussion Papers 1114, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:dpaper:1114
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    Cited by:

    1. Jaakko Pehkonen & Sampo Pehkonen & Matthias Strifler & Mika Maliranta, 2017. "Profit Sharing and the Firm-Size Wage Premium," LABOUR, CEIS, vol. 31(2), pages 153-173, June.

    More about this item

    Keywords

    foreign ownership; local labour markets; survival; growth; company efficiency; selection; reallocation;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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