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Effects of Foreign Ownership On Innovation Activities: Empirical Evidence for Twelve European Countries

Published online by Cambridge University Press:  26 March 2020

Martin Falk
Martin Falk*
Affiliation:
WIFO, Arsenal Objekt 20, A-1030 Vienna
*
e-mail Martin.Falk@wifo.ac.at
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Abstract

In the present study we investigate the relationship between foreign ownership and innovation activities using the firmlevel data of the third Community Innovation Survey (CIS) covering twelve European countries. Probit estimates based on 28,000 firms' observations show that foreign-owned firms are more innovative than domestic firms, particularly in the New EU Member States. However, results from the Blinder-Oaxaca decomposition of the differences in the percentage of innovating firms between foreign-owned and domestic firms reveals that the differences are mainly due to the different firm characteristics rather than the differences in coefficients. In particular, the dominance of foreign-owned firms in the largest firm size group is the main factor contributing to the gap in the percentage of innovators between foreign-owned firms and domestic firms. Furthermore, using the fractional logit model, we find that in the New EU Member states, foreign ownership has a positive and significant impact on the share of market novelties as well as on the share of new products in turnover. In this case, the results from the Blinder-Oaxaca decomposition analysis indicate that the ownership difference in the share of innovative sales is not due to the differences in the observed firms' characteristics.

Keywords

Foreign ownershipmultinational firmsproduct and process innovationsF23C24C25L2O3
Type
Articles
Information
National Institute Economic Review , Volume 204 , April 2008 , pp. 85 - 97
Copyright
Copyright © 2008 National Institute of Economic and Social Research

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