Home Firm Performance After Foreign Investments and Divestitures. (9th April 2013)

• Record Type: Journal Article
• Authors: Engel, Dirk; Procher, Vivien
• Is Part Of: World economy. Volume 36:Number 12(2013:Dec.)
• Page Start: 1478
• Page End: 1493
• Publication Date: 2013-04-09
• Subjects: International economic relations -- Periodicals; 330
• DOI: 10.1111/twec.12068
• Languages: English
• ISSNs: 0378-5920

Abstract

Abstract: An almost undisputed aim for firms in today's globalised world is to operate internationally. Several papers find a positive relationship between foreign direct investment (FDI) and the domestic performance of firms. In this paper, we address the 'FDI – export' relationship to better understand this trend. Furthermore, by presenting results on firm's post‐divestiture employment growth at home, we are able to provide a more comprehensive view on firm performance after stepping in and out of foreign markets. We apply a propensity score matching technique in combination with a difference‐in‐difference estimator to analyse the performance dynamics of French firms that either invested abroad or carried out foreign divestitures during the period 2000–2007. FDI has, on average, a positive effect in terms of export share, operating turnover and employment in firm's domestic market. Industry differences reveal that firms in high‐tech industries experience a strong increase in their domestic performance, whereas firm performance in low‐tech industries increases only moderately in post‐investment periods. In contrast, the divestiture impact on the post‐divestiture performance is rather negligible.