Economia delle Imprese Multinazionali

Transcription

1 Economia delle Imprese Multinazionali Lezione su Effetti diretti delle IMN su paesi di origine e di destinazione! Davide Castellani Università di Perugia Dipartimento di Economia davide.castellani@unipg.it

2 Impacts of MNEs Direct vs indirect Direct à intra vs. inter-industry Indirect à linkages vs. spillovers / pecuniary vs. non-pecuniary Home vs. Host On Market structure Technology and productivity Employment, wages, labour conditions Trade balance

3 Impacts of MNEs Methodology Counterfactual analysis What would have happened if MNEs would not have entered? MNEs would not have invested abroad? A firm had not been acquired? How to assess this empirically? Assume a counterfactual Estimate the counterfactual from the data Difference-in-difference (pre vs. post event) Propensity score matching (find the nearest neighbor )

4 Impacts of MNEs Methodology Counterfactual analysis What would have happened if MNEs would not have entered? MNEs would not have invested abroad? A firm had not been acquired? How to assess this empirically? Assume a counterfactual Estimate the counterfactual from the data Difference-in-difference Propensity score matching

5 Methodological issues: pre- and post-investment Employment 0 (Year of investment abroad) Economia Time

6 Methodological issues: pre- and post-investment Employment No effect 0 (Year of investment abroad) Economia Time

7 Methodological issues: pre- and post-investment Positive effect No effect Employment Negative effect 0 (Year of investment abroad) Economia Time

8 Methodological issues: defining the right counterfactual Employment Did investment abroad cause empoyment losses at home? 0 (Year of investment abroad) Economia Time Switching firms

9 Methodological issues: defining the right counterfactual Employment Counterfact ual 1 Switching firms 0 (Year of investment abroad) Economia Time

10 Methodological issues: defining the right counterfactual Employment Counterfact ual 1 0 (Year of investment abroad) Economia Time Switching firms Counterfact ual 2

11 Sample NAT INV Destination of INV s FDI ADV CEE DEV Tot. No. of firms 2, North west North east Centre South and Islands Total Italy Size average Productivity average 54,452 59,125 60,959 51,977 71,094 59,125 Share of managers average Share of clerks 0.28 average Share of manual workers average Economia

12 Descriptive statistics (1) Average number of employees in type of firms (baseline in 1998) 1,2 1,15 1,1 1,05 1 0,95 0, ADV CEE DEV NAT Economia

13 Descriptive statistics (2) Average number of employees before and after investment (baseline in the year of investment) 1,2 1,1 1 0,9 0, ADV CEE DEV Economia

14 Descriptive statistics (3) Average number of manual workers before and after investment (baseline in the year of investment) 1,3 1,25 1,2 1,15 1,1 1,05 1 0,95 0, ADV CEE DEV Economia

15 Distribution of Italian and French switching firms, by sector Italy France LDC DC LDC DC Food, beverages and tobacco Textiles Leather Wood Pulp, paper and publishing Chemicals Rubber and plastic Other non-metallic mineral products Basic metals and fabricated metal p Machinery and equipment n.e.c Electrical and optical equipment Transport equipment Manufacturing n.e.c Wholesale and retail trade Total Economia

16 Distribution of Italian and French switching firms, by area of destination Country Italy France Area of destination Asia 16.9% 17.5% Eastern Europe 60.5% 46.3% Latin America 7.9% 11.3% Other LDC 14.7% 25.0% Total LDC 100.0% 100.0% EU 71.7% 61.5% North America 13.1% 14.3% Other DC 15.2% 24.2% Economia Total DC 100.0% 100.0%

17 Descriptive stat. on national and switching firms (mean) Italy France National Firms Firms Nation Firms Firms firms SW to SW to al SW to SW to 28,645 N. obs. 17, N. of employees Turnover 15'831 30'468 69'754 21'411 80'125 94'614 TFP Labour Avg. Wage Age ROI Current ratio Economia

18 Probability of switching for French and Italian firms. Multinomial logit Italy France Switching in LDC Log TFP 2.001*** (0.264) 1.577*** (0.421) Log Nb. Employees (0.106) 0.524*** (0.138) Log Cost of labour per employee *** (0.417) (0.644) Log Age 0.256** (0.117) 0.326** (0.140) Return on investments *** (1.033) (1.312) Current ratio ** (0.160) (0.146) Switching in DC Log TFP 2.170*** (0.401) 1.336*** (0.396) Log Nb. Employees 0.495*** (0.141) 0.520*** (0.117) Log Cost of labour per employee *** (0.635) 1.176** (0.565) Log Age 0.323** (0.152) (0.118) Return on investments (1.543) (1.196) Current ratio (0.191) (0.119) Number of obs Pseudo R Economia Asterisks denote significance at 1% (***), 5% (**) and 10% (*). Intercept and sector, regional and year dummies not reported

19 Descriptive stat. on switching firms and matched controls (mean) Italy France LDC DC LDC DC Control SW Control SW Contro SW Control SW N. obs N. of empl Turnover 19'838 26' '760 70' '859 84'030 TFP Labour prod Wage Age ROI Current Economia

20 Performance trajectories of switching firms and matched controls: Italy LDC DC 0.60 Switching 0.90 TFP (log) Control TFP TFP (log) Switching Control Value added (log) Switching Control Value Added Value Added (log) Switching Control Economia

21 Performance trajectories of switching firms and matched controls: France LDC DC Switching Control TFP (log) Switching TFP TFP (log) Control Value Added (log) Switching Value Added Value Added (log) Switching Control 8.4 Control

22 Employment trajectories of switching firms and matched controls LDC DC Nb. Employees (log) Switching Control Italy Nb. Employees Switching Control N. Employees (log) Switching Control France Nb. Employees (log) Switching Control

23 Direct effects 1. Is the inter- and intra-sectoral distribution of output of MNEs, or that of their affiliates, different from that of uninational or indigenous firms? 2. Are MNEs more or less efficient in undertaking these activities than their uninational counterparts? 3. Do MNEs induce more or less industrial concentration than would otherwise be the case? Do they prompt more or less product diversification? Do they foster more or less vertical integration? Do they engage in more or less alliance formation and networking? 4. What are the implications of acquisitions on market structure and performance? 5. How might home or host governments ensure that the conduct of MNEs is consistent with their own economic and other objectives?

24 Direct effects Conditional vs. unconditional The unconditional approach simply compares firms of different categories to each other (domestic/ foreign, MNE/non-MNE), while the conditional approach takes into account such contextual differences as size, technology and choice of industry The unconditional approach is simple, but not always very informative. Yet, while the conditional approach is preferable in many ways, it may explains away much of the uniqueness of MNEs and the O-specific advantages they possess.

25 Direct effects The empirical evidence is quite unambiguous on the fact that performance gaps exist between foreign affiliates and domestic firms, the most notable of these being the productivity and wage gaps Even in conditional analyses, once the choice of industry and the quality of the employees (their skill level) and/or productivity are controlled for, wage gaps still persist. A productivity gap still persists, even after the normalising for differences in the sectoral distribution of the two groups of firms, although, as in the case of the wage gap, the differences are much smaller than in the unconditional comparison.

26 Direct effects Why and under what circumstances should it be expected that the impact of MNEs on the industrial and market structure of national economies would be different from that of their uninational or indigenous competitors? the impact of MNEs on the competitiveness of home and host countries depends on the nature and extent of their O-specific assets and of the ways in which they augment and/or organise the deployment of these assets in different locations. on the institutional infrastructure of the countries in which they operate, and how it might be affected by the conduct and performance of MNEs.

27 Direct effects In theory, O advantages should improve inter-sectoral (allocative) efficiency and/or help raise technical and/or scale efficiency. Over time, these advantages should also assist the restructuring of indigenous resources and capabilities to meet new supply or marketing needs. De facto, however, much will rest on the nature of the O advantages and in particular, whether they are the outcome of competitive or monopolistic forces and of the use made of these advantages. This, in turn, will be partly dependent on the countryspecific institutional configurations with which the MNEs are faced.

28 Direct effects Even the most obvious O advantages of MNEs (for example, the provision of superior intangible assets, new markets and more dynamic entrepreneurship) may have an ambivalent outcome. On the one hand, they may promote growth and competition in the industries or strategic groups in which they operate. On the other, they may squeeze out their competitors and give the investing firms a monopolistic stranglehold on the industry of which they are part. Nor does economic theory offer any clear-cut prediction as to whether international production will lead to a more or less concentrated market structure, to more or less product diversification, or to more or less vertical integration. much depends on the mode of entry by the MNE, its size and product composition, and status in relation to its competitors

29 Direct effects MNEs and the allocation of resources the entry of MNEs may facilitate the restructuring of economic activity between sectors the sectoral distribution of value-added activity by MNEs is different from that of the other firms in these countries 1. high capital- and technology-intensive producer goods (for example, earth-moving equipment, industrial instruments and pharmaceuticals); 2. mass production consumer or producer goods (for example, motor vehicles) 3. differentiated consumer goods with a high income elasticity of demand (for example,processed foods, detergents and cosmetics). MNE entry may also facilitate such a restructuring within sectors, depending on the degree to which inward FDI is concentrated in the more capital-intensive, higher value-added segments of particular industries.

30 Direct effects MNEs and the allocation of resources the entry of MNEs may facilitate the restructuring of economic activity between sectors In Mexico, the automotive industry was transformed in the late 1980s and early 1990s from a fragmented low-productivity industry to integrated global production led by US and Japanese MNEs The UK automotive sector was revitalised by Japanese (and later US) investment in the same period. In Japan, after the Second World War, technology transfer from US MNEs (mostly through licensing) assisted the industrial restructuring away from the labour-intensive industries (food and beverages, textiles) to the capital-intensive industries (machinery, fabricated metals, transport equipment, chemicals) outward investment from Japan also played a decisive role in the restructuring process. First, it occurred in the labour- intensive sectors, and this was followed by resourceseeking investment in the energy- intensive (and -polluting) activities, then by high value-added FDI particularly in the automotive sector and in services

31 Direct effects MNEs and the allocation of resources the entry of MNEs may facilitate the restructuring of economic activity between sectors Outward investment from Japan and the US also prompted an industrial reconfiguration by other Asian countries in a pattern consistent with the predictions of the flying geese paradigm One by one as they became more industrialised, led by Japan and followed by Singapore, Hong Kong, South Korea and Taiwan, moved away from producing labour-intensive textiles and apparel to electronics, and shifted intra-industry production from lower to higher value- added activities. In textiles, the materials and markets provided by MNEs allowed for the growth of indigenous trading companies in South Korea and Taiwan, and a move up the value-added chain to, for example, synthetic fibres, and eventually outward FDI from Taiwan and Hong Kong. In electronics, similar developments took place in Malaysia, Thailand, the Philippines, South Korea and Taiwan, where low-end assembly operations gave way to higher value-added activities, and the emergence of indigenous competitors

32 Direct effects MNEs and the allocation of resources the entry of MNEs may facilitate the restructuring of economic activity between sectors In Central and Eastern Europe, the more recent contribution of FDI to restructuring has also been substantial. MNE activity was concentrated in sectors with above-average profitability, assets per employee and export orientation. in the Czech Republic, Slovenia, Hungary and Slovakia, MNEs were overrepresented in motor vehicles, Hungary and Slovakia, they were prominent in chemicals and electrical machinery. In general, the distribution of MNE investment tended to be in line with the country s comparative dynamic advantage vis-à-vis the rest of the EU.

33 Direct effects MNEs and the allocation of resources the entry of MNEs may facilitate the restructuring of economic activity between sectors inbound foreign investment might also help host countries to achieve a more balanced industrial portfolio, that is, an industrial structure that enables faster growth with lower risk. E.g. Ireland in , where MNE activity was concentrated in the higher value-added manufacturing sectors such as office equipment, computers, electrical professional instruments and pharmaceuticals, while domestic investment was concentrated in sectors such as food and textiles.

34 Direct effects MNEs and the allocation of resources MNE entry may also facilitate such a restructuring within sectors, depending on the degree to which inward FDI is concentrated in the more capital-intensive, higher value-added segments of particular industries. MNEs tend to engage in proportionately more high-value activities in their home countries, employ a higher proportion of skilled workers, and vertically integrated than their uninational counterparts Foreign affiliates of MNEs employ higher ratios of skilled to unskilled workers than indigeneous firms in host countries, but tend to be less vertically integrated

35 Direct effects MNEs and technical efficiency The fact that foreign-owned firms do possess unique incomegenerating O assets relative to indigenous firms might suggest that they should be both more productive and profitable. But, 1. foreign firms may be faced with certain competitive disadvantages 2. it is often not necessary for an MNE to earn higher average rates of return on its capital than its competitors (either in its home or host country). 3. the fact that MNEs may be more efficient as suppliers of intermediate products does not necessarily mean that they are better at adding value to these products than are domestic firms. 4. a firm may use its O advantages to exploit a monopolistic position rather than to improve the efficiency of resource allocation 5. much MNE activity is motivated by the desire to augment or to tap into foreign resources and capabilities, which might help advance their global strategic goals.

36 Direct effects MNEs and technical efficiency If MNEs, in general, are likely to be more productive than purely domestic firms, the entry of a foreign firm into a host economy might be expected to have two kinds of effect. The direct effect is a simple composition effect, whereby average productivity in the host economy would be increased with the inclusion of a high-performing firm. In addition, if the entry of a more productive foreign firm also caused some of the least-productive domestic firms to exit, this would result in further increases in average productivity in the host country. An indirect effect arises if and when the productivity advantage of the MNEs also helps to improve the productivity of local firms. 1. the linkages between the MNE and local suppliers (pecuniary externalities) 2. productivity advantages can be transmitted to domestic firms through deliberate transfers of knowledge and technology by, for example, training, or through licensing 3. productivity advantages can spill over to local firms as non-pecuniary knowledge externalities, such as demonstration effects and labour market exchanges

37 Direct effects The Impact of Acquisitions on Productivity Cross-border acquisitions offer a natural experiment for revealing the productivity advantages of MNEs and/or their affiliates as compared to domestic firms One challenge is how best to control for the competitiveness of the acquired firm prior to acquisition, since any observed productivity gain following the acquisition might be due to foreign MNEs having cherry picked the most productive candidates for acquisition, rather than any productivity improvements arising from the O advantages of the MNE. Furthermore, even controlling for the initial level of productivity, it is possible that any improvements following an acquisition might be due to exogenous improvements in the host economy, rather than those specific to the M&A. To overcome this problem, a few studies have explored the counterfactual scenario by comparing the performance of the acquired firm to other domestic firms that, in every other identifiable respect, resemble it. comparisons between firms that were acquired by foreign or domestic multinationals and firms that were not subject to acquisition

38 Direct effects The effects of MNE activity on the market structure of host countries. MNEs may be able to overcome entry barriers, thus increase competition and reduce industrial concentration by their entry into existing foreign markets. MNEs may either enter into new markets and create their own barriers to further competition, or, as a result of their superior efficiency and aggressive business practices, drive out competitors from existing markets, thereby increasing industrial concentration