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Discussion Paper Details

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Title: Innovation and Foreign Ownership

Author(s): Maria Guadalupe, Olga Kuzmina and Catherine Thomas

Publication Date: December 2010

Keyword(s): Foreign Ownership, Innovation, Multinational Production and Productivity

Programme Area(s): International Trade and Regional Economics

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.

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Bibliographic Reference

Guadalupe, M, Kuzmina, O and Thomas, C. 2010. 'Innovation and Foreign Ownership'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8141