TY - JOUR
T1 - Foreign ownership, firm performance, and the geography of civic capital
AU - Bürker, Matthias
AU - Franco, Chiara
AU - Minerva, G. Alfredo
PY - 2013
Y1 - 2013
N2 - It is well established in the literature that foreign affiliates are subject to a series of governance and assimilation costs that may deteriorate their performance. This is particularly relevant for firms which have been recently
acquired by foreign investors. We employ the variation in civic capital across Italian provinces as an exogenous determinant of these governance costs. We claim that the effect of foreign ownership on productivity is less favorable
in areas where civic capital is low. As the level of local civic capital increases, the scope for opportunistic
behavior is reduced, which makes the governance of foreign affiliates easier and improves their performance.We take this prediction to the data and find confirmation of our conceptual framework. Our analysis uncovers the importance of the geographic heterogeneity of informal norms and institutions in analyzing the nexus between foreign ownership and performance.
AB - It is well established in the literature that foreign affiliates are subject to a series of governance and assimilation costs that may deteriorate their performance. This is particularly relevant for firms which have been recently
acquired by foreign investors. We employ the variation in civic capital across Italian provinces as an exogenous determinant of these governance costs. We claim that the effect of foreign ownership on productivity is less favorable
in areas where civic capital is low. As the level of local civic capital increases, the scope for opportunistic
behavior is reduced, which makes the governance of foreign affiliates easier and improves their performance.We take this prediction to the data and find confirmation of our conceptual framework. Our analysis uncovers the importance of the geographic heterogeneity of informal norms and institutions in analyzing the nexus between foreign ownership and performance.
KW - Civic capital
KW - Foreign direct investment
KW - Performance of foreign owned firms
KW - Total factor productivity
KW - Civic capital
KW - Foreign direct investment
KW - Performance of foreign owned firms
KW - Total factor productivity
UR - http://hdl.handle.net/10807/62796
U2 - 10.1016/j.regsciurbeco.2013.09.009
DO - 10.1016/j.regsciurbeco.2013.09.009
M3 - Article
SN - 0166-0462
VL - 43
SP - 964
EP - 984
JO - Regional Science and Urban Economics
JF - Regional Science and Urban Economics
ER -