DP7329 Foreign acquisition, plant survival, and employment growth

Author(s): Roger Bandick , Holger Görg

Publication Date: June 2009

Keyword(s): acquisitions , employment growth , multinational enterprises , plant survival

JEL(s): F23 , L23

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP7329.asp.asp

This paper analyses the effect of foreign acquisition on survival probability and employment growth of target plant using data on Swedish manufacturing plants during the period 1993-2002. An improvement over previous studies is that we take into account firm level heterogeneity by separating the targeted plants into those within Swedish MNEs, Swedish exporting non-MNEs, and purely domestic firms before foreign takeover. The results, controlling for possible endogeneity of the acquisition dummy using an IV and propensity score matching approach suggest that acquisition by foreign owners increases the lifetime of the acquired plants only if the plant was an exporter. The effect differs depending on whether the acquisition is horizontal or vertical. We also find robust positive employment growth effects only for exporters, and only if the takeover is vertical, not horizontal.