Using a large panel of European firms covering the years 2007–2015, this study investigates the effects of outward foreign direct investment (OFDI) on performance. Controlling for self-selection through propensity score matching techniques at baseline in a two-way fixed effect difference-in-differences framework, we determine that OFDI firms exhibit higher productivity, value-added, sales, and profit compared with non-OFDI firms. Heterogeneity analysis by destination reveals that the highest performance premia accrue to firms that invested in non-European Union (EU) countries, developed economies and technology-advanced hosts. Heterogeneity analysis by ownership structure shows that OFDI established via joint-venture or wholly owned enterprises have similar, positive performance premia. Furthermore, investing abroad entails no reduction in the parent companies’ number of employees. Finally, we document an increase in research and development expenditure for OFDI firms at both intensive and extensive margins, indicating a potential driver of the observed performance premia.

Aktas, K., Gattai, V., Natale, P. (2024). What a difference an OFDI makes. Firm-level evidence from the EU. INTERNATIONAL ECONOMICS, 180(December 2024) [10.1016/j.inteco.2024.100537].

What a difference an OFDI makes. Firm-level evidence from the EU

Aktas, K;Gattai, V;Natale, P.
2024

Abstract

Using a large panel of European firms covering the years 2007–2015, this study investigates the effects of outward foreign direct investment (OFDI) on performance. Controlling for self-selection through propensity score matching techniques at baseline in a two-way fixed effect difference-in-differences framework, we determine that OFDI firms exhibit higher productivity, value-added, sales, and profit compared with non-OFDI firms. Heterogeneity analysis by destination reveals that the highest performance premia accrue to firms that invested in non-European Union (EU) countries, developed economies and technology-advanced hosts. Heterogeneity analysis by ownership structure shows that OFDI established via joint-venture or wholly owned enterprises have similar, positive performance premia. Furthermore, investing abroad entails no reduction in the parent companies’ number of employees. Finally, we document an increase in research and development expenditure for OFDI firms at both intensive and extensive margins, indicating a potential driver of the observed performance premia.
Articolo in rivista - Articolo scientifico
Difference-in-differences (DID); European Union (EU); Foreign direct investment (FDI); Outward foreign direct investment (OFDI); Performance premia; Propensity score matching (PSM);
English
18-ago-2024
2024
180
December 2024
100537
none
Aktas, K., Gattai, V., Natale, P. (2024). What a difference an OFDI makes. Firm-level evidence from the EU. INTERNATIONAL ECONOMICS, 180(December 2024) [10.1016/j.inteco.2024.100537].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/522304
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