Selection, Productivity Growth, and Multinational Subsidiaries: New Evidence from Korea
Selection, Productivity Growth, and Multinational Subsidiaries: New Evidence from Korea

Summary/Abstract: This paper uses Korean firm- level manufacturing data to study the selections and productivity growth of multinational subsidiaries. A simple cross- sectional comparison may overstate the superior performance of multinationals by not controlling properly for the selection effects in acquisitions and divestures. This paper shows that multinational enterprises tend to acquire firms in the upper range of the productivity distribution and to divest relatively less productive affiliates. This study also shows that multinational subsidiaries tend to grow in productivity faster than domestic firms, but productivity growth is significant only in R&D intensive subsidiaries. The results emphasize the importance of complementarity between foreign ownership and R&D.

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