MULTINATIONALS’ PRODUCTIVITY ADVANTAGE: SCALE OR TECHNOLOGY?

This study decomposes the productivity advantage of foreign multinationals into a technology and a scale effect and analyses the causal relationship between foreign ownership and these two components. This is done by analyzing the effects of an acquisition of a domestic establishment by a foreign multinational, using a combined propensity score matching and difference-in-differences estimation. The main results show that any positive impact of acquisition is predominantly due to changes in technical efficiency and not in scale and that the preacquisition productivity of the target plays a role in mediating the rate of technology transfer from the multinational. ( JEL F23, L22)