Etla » multinational firms

International Investment and Firm Performance: Empirical Evidence from Small Open Economies

Ville Kaitila — Fri, 01 Mar 2013 07:30:00 +0000

Abstract: This paper examines the causal link between foreign investment and firm performance in six small open economies in the European Union. Specifically, using micro data for manufacturing and services over the period 2001-2009, we analyse the effects of foreign mergers and acquisitions on labour productivity and employment growth up to five years after acquisition. Our results indicate that foreign investors tend to acquire larger firms in both manufacturing and services. Other characteristics of acquired firms differ across countries and between manufacturing and services. Taken together, our estimates suggest that foreign investment had stronger effects on firm performance in services in comparison to manufacturing.

How foreign companies in Finland differ from Finnish-owned enterprises? (In Finnish with English abstract)

Ville Kaitila — Thu, 11 Oct 2012 08:27:08 +0000

We analyse foreign-owned companies operating in Finland and compare them with domestic non-multinational firms while controlling separately for domestic multinational firms. The statistical and micro-econometric analysis is done using Statistics Finland data that contain all firms with at least ten employees in 1998–2008, partly in 1995–2010. We also control for a number of exogenous factors. According to the results, foreign-owned firms have higher productivity than domestic non-multinational firms. There is no difference in the average growth rate of productivity if the difference in levels is not controlled. Accordingly, a shift to foreign ownership has, on average, not affected the growth rate of productivity. The results concerning the growth rate of employment depend upon the method and timespan used in the analysis. The personnel of foreign-owned firms have a longer and higher education than the personnel of domestic non-multinational firms. Foreign-owned firms pay more direct taxes in relation to the number of their employees, which is partly due to these firms’ higher productivity. The probability of becoming a target of a foreign acquisition is higher for medium-sized and large Finnish firms with high productivity than other firms.

Mobility of Corporate Headquarter Functions: A Literature Review

admin — Wed, 21 Oct 2009 11:00:00 +0000

This paper reviews the recent literature on the relocation of headquarters (HQs). Overall results show that full and direct international relocations of corporate HQs are rare events. However, there is a trend that MNEs increasingly unbundle their HQs so as to spread their different HQs functions over several locations around the world. The literature on the organisation of companies shows that HQ unbundling can go hand in hand with different patterns of HQ relocations. The international trade literature underlines that falling communication costs enable firms to offshore HQ-tasks that were previously considered non-traded. International competition occurs now between individual workers performing similar HQ-tasks in different nations. The new economic geography literature explains the spatial concentration of HQs functions by the existence of agglomeration effects. Most empirical literature focuses on relocations within the United States. Relocations within the EU are less frequent which may be explained by legal and cultural barriers. An important finding is that many HQ relocations result from a merger or acquisition, but institutional factors, such as international tax incentives and labour market institutions, were also identified as key drivers of HQ relocations. The effects of relocations on the company performance are relatively small although results seem to depend on the motivation behind the relocation. For nations, the unbundling of HQs implies that the competition between (potential) locations for HQ functions will rise.

Pääkonttoritoimintojen liikkuvuus. Katsaus kirjallisuuteen

Distance-related Barriers and the Internationalisation of Finnish MNEs

admin — Mon, 07 Sep 2009 11:00:00 +0000

In an integrated global economy, multinational enterprises (MNEs) have more opportunities than ever to reap the benefits of broader markets and more possibilities for an extensive division of labour between different locations. In spite of this, the evidence on the spread of the activities of MNEs seems to indicate a strong regional tendency, at least for the largest MNEs. This paper examines the theoretical arguments for the existence of such boundaries in an integrated global economy, and then examines their empirical importance using recent evidence on the internationalisation patterns of Finnish MNEs. We find that while some of the largest MNEs do indeed appear to be quite regional, some of the smaller internationalising firms are notably more global in terms of the spread of their activities.

Regional and Global Patterns of Internationalisation of Finnish MNEs

admin — Fri, 19 Dec 2008 11:00:00 +0000

Much of the recent evidence on the internationalisation patterns of Finnish MNEs has come from analyses of the Top 30 firms. This paper uses newly available data from the Orbis database on the foreign affiliates of Finnish MNEs, and compares this to the existing sources of data from the Bank of Finland and Statistics Finland. By utilising firm-level that includes smaller internationalising firms, we are able to get a more com-prehensive picture of the international activities Finnish firms. We are also able to present an analytically grounded classification of the different types of internationalising firms in terms of the spread or entropy of their international activities. Such a classification will enable a more fine-grained measure of internationalisation in future studies that examine for example the effects of internationalisation on the home country.

Large Corporations in the Finnish Economy

admin — Thu, 05 Jun 2008 11:00:00 +0000

This paper is a part of larger research project on the role of the 30 largest firms in the Nordic countries. By examining the changes in the role of top 30 firms in the Finnish economy we aim to reveal some essential features of the structural transformation in the economy. From the national economy point of view these firms are in a crucial position. Almost all of them are multinationals, operate in several countries, and make influential decisions on trade and location of production. The analysis suggests that top 30 firms account for a substantial portion of business sector employment and value added in Finland. Moreover, the role of these large companies is particularly significant in foreign direct investment and in research and development. Our data however indicate that their role in the Finnish economy in terms of output and employment shares seems to have decreased during the recent decades. Yet, it is an open question to what extent large firms have reorganized their operations in such a way that they do not directly show up in their own output and employment data.

The Home Country Effects of Internationalisation

admin — Tue, 21 Aug 2007 11:00:00 +0000

The widening range of countries acting as home and host to MNEs, and the continuing growth in all forms of cross-border economic activity, have prompted a large literature on the effects of outward MNE activity on the host countries. A smaller body of work has examined the effects on the home countries of MNEs, but this literature has remained quite fragmented. The purpose of this paper is to bring together and review the different strands of the literature examining the home country effects, and to discuss how some of the changes ongoing in the global economy are likely to impact the analyses on the complementarity between home and host country activities.

Outsourcing and Offshoring – Overview from Finland in the Early 21st Century (in Finnish with English abstract and summary)

admin — Mon, 11 Dec 2006 11:00:00 +0000

This study analyses the extent and motives of outsourcing and offshoring. We find that in early 2000, 10, 000 23, 000 jobs were transferred overseas from Finland. Annually this corresponds to approximately 1.0 2.5% of normal job losses and creations in the Finnish labour market. The majority of offshored jobs concern manufacturing tasks. Only a tiny number of R&D jobs have been relocated from Finland. Outsourcing is most commonly observed in ser-vice-related functions, but also manufacturing and R&D tasks have been outsourced. The main drivers of production outsourcings have been cost savings, capacity and flexibility increases. In terms of R&D outsourcing, attempts to acquire knowledge, increase flexibility and reduce costs are dominating motives.

The Global Dispersion of Innovative Activities – The Case of Finnish Multinationals

admin — Fri, 11 Jun 2004 11:00:00 +0000