Foreign ownership and skill-biased technological change

TY - JOUR

T1 - Foreign ownership and skill-biased technological change

AU - Koch, Michael

AU - Smolka, Marcel

PY - 2019/5

Y1 - 2019/5

N2 - We conduct an empirical investigation into the effects of foreign ownership on worker skills using firm-level data from Spain. To control for endogeneity bias due to selection into foreign ownership, we combine a difference-in-differences approach with a propensity score weighting estimator. Our results provide novel evidence that foreign-acquired firms actively raise the skills of their workforce in response to the acquisition by hiring high-skilled workers and providing worker training. To pin down the mechanism, we exploit unique information on whether firms use their foreign parent in exporting to foreign markets. Our results suggest a fundamental role for market access through the foreign parent in explaining skill upgrading in foreign-acquired firms. We reveal substantial productivity gains within foreign-acquired firms and we show that these gains derive from a concurrent effort to raise worker skills and adopt more advanced technology, suggesting a skill bias in technological innovations. We develop a simple theoretical model of foreign ownership featuring technology-skill complementarities in production that can rationalize our findings.

AB - We conduct an empirical investigation into the effects of foreign ownership on worker skills using firm-level data from Spain. To control for endogeneity bias due to selection into foreign ownership, we combine a difference-in-differences approach with a propensity score weighting estimator. Our results provide novel evidence that foreign-acquired firms actively raise the skills of their workforce in response to the acquisition by hiring high-skilled workers and providing worker training. To pin down the mechanism, we exploit unique information on whether firms use their foreign parent in exporting to foreign markets. Our results suggest a fundamental role for market access through the foreign parent in explaining skill upgrading in foreign-acquired firms. We reveal substantial productivity gains within foreign-acquired firms and we show that these gains derive from a concurrent effort to raise worker skills and adopt more advanced technology, suggesting a skill bias in technological innovations. We develop a simple theoretical model of foreign ownership featuring technology-skill complementarities in production that can rationalize our findings.

KW - Mergers and acquisitions

KW - Multinational enterprises

KW - Productivity

KW - Skill-biased technological change

KW - Worker training

UR - http://www.scopus.com/inward/record.url?scp=85062540117&partnerID=8YFLogxK

U2 - 10.1016/j.jinteco.2019.01.017

DO - 10.1016/j.jinteco.2019.01.017

M3 - Journal article

AN - SCOPUS:85062540117

SN - 0022-1996

VL - 118

SP - 84

EP - 104

JO - Journal of International Economics

JF - Journal of International Economics

IS - May

ER -