Department of Economics and Business Economics

Foreign Ownership and Skill-biased Technological Change

Research output: Working paperResearch

Standard

Foreign Ownership and Skill-biased Technological Change. / Koch, Michael; Smolka, Marcel.

Aarhus : Institut for Økonomi, Aarhus Universitet, 2017.

Research output: Working paperResearch

Harvard

Koch, M & Smolka, M 2017 'Foreign Ownership and Skill-biased Technological Change' Institut for Økonomi, Aarhus Universitet, Aarhus.

APA

Koch, M., & Smolka, M. (2017). Foreign Ownership and Skill-biased Technological Change. Aarhus: Institut for Økonomi, Aarhus Universitet. Economics Working Papers, No. 2017-04

CBE

Koch M, Smolka M. 2017. Foreign Ownership and Skill-biased Technological Change. Aarhus: Institut for Økonomi, Aarhus Universitet.

MLA

Koch, Michael and Marcel Smolka Foreign Ownership and Skill-biased Technological Change. Aarhus: Institut for Økonomi, Aarhus Universitet. (Economics Working Papers; Journal number 2017-04). 2017., 38 p.

Vancouver

Koch M, Smolka M. Foreign Ownership and Skill-biased Technological Change. Aarhus: Institut for Økonomi, Aarhus Universitet. 2017 May 23.

Author

Koch, Michael ; Smolka, Marcel. / Foreign Ownership and Skill-biased Technological Change. Aarhus : Institut for Økonomi, Aarhus Universitet, 2017. (Economics Working Papers; No. 2017-04).

Bibtex

@techreport{1c23116b54fd43b38682d006a654e538,
title = "Foreign Ownership and Skill-biased Technological Change",
abstract = "Understanding the effects of foreign direct investment and the behavior of multinational enterprises (MNEs) is a core issue in the study of international economics. We exploit within-firm variation in ownership structure induced by foreign acquisitions in Spain to provide a new angle on the relationship among foreign ownership, technology, and skills. We first develop a model in which heterogeneous firms decide endogenously about the level of technology, the share of high-skilled workers, and the level of worker training. Foreign-owned firms implement better technology than domestically owned firms due to access to foreign markets through the foreign parent. This market size effect, coupled with a technology-skill complementarity, raises the demand for high-skilled workers as well as worker training upon acquisition. The largest productivity gains predicted by the model accrue to those firms that optimally combine better technology with a larger share of high-skilled workers in production and a better trained workforce. We test these predictions on a longitudinal data set of Spanish manufacturing firms. Combining firm fixed effects with a suitable propensity score weighting estimator, we find empirical evidence that foreign-acquired firms, not only increase their technology level, but also engage in skill upgrading upon acquisition (through both hiring and training). Moreover, we show that these changes are driven by the market size effect, and not by changes in the ownership structure per se. Finally, we reveal a technology-skill complementarity in the data implying that the productivity gains associated with better technology are magnified for firms actively engaging in skill upgrading. Overall, our paper provides strong evidence for the notion that foreign MNEs {"}inject{"} skill-biased technological change into their affiliated firms.",
keywords = "Multinational Enterprises, Mergers and Acquisitions, Skill-biased Technological Change, Worker Training Productivity",
author = "Michael Koch and Marcel Smolka",
year = "2017",
month = "5",
day = "23",
language = "English",
series = "Economics Working Papers",
publisher = "Institut for {\O}konomi, Aarhus Universitet",
number = "2017-04",
type = "WorkingPaper",
institution = "Institut for {\O}konomi, Aarhus Universitet",

}

RIS

TY - UNPB

T1 - Foreign Ownership and Skill-biased Technological Change

AU - Koch, Michael

AU - Smolka, Marcel

PY - 2017/5/23

Y1 - 2017/5/23

N2 - Understanding the effects of foreign direct investment and the behavior of multinational enterprises (MNEs) is a core issue in the study of international economics. We exploit within-firm variation in ownership structure induced by foreign acquisitions in Spain to provide a new angle on the relationship among foreign ownership, technology, and skills. We first develop a model in which heterogeneous firms decide endogenously about the level of technology, the share of high-skilled workers, and the level of worker training. Foreign-owned firms implement better technology than domestically owned firms due to access to foreign markets through the foreign parent. This market size effect, coupled with a technology-skill complementarity, raises the demand for high-skilled workers as well as worker training upon acquisition. The largest productivity gains predicted by the model accrue to those firms that optimally combine better technology with a larger share of high-skilled workers in production and a better trained workforce. We test these predictions on a longitudinal data set of Spanish manufacturing firms. Combining firm fixed effects with a suitable propensity score weighting estimator, we find empirical evidence that foreign-acquired firms, not only increase their technology level, but also engage in skill upgrading upon acquisition (through both hiring and training). Moreover, we show that these changes are driven by the market size effect, and not by changes in the ownership structure per se. Finally, we reveal a technology-skill complementarity in the data implying that the productivity gains associated with better technology are magnified for firms actively engaging in skill upgrading. Overall, our paper provides strong evidence for the notion that foreign MNEs "inject" skill-biased technological change into their affiliated firms.

AB - Understanding the effects of foreign direct investment and the behavior of multinational enterprises (MNEs) is a core issue in the study of international economics. We exploit within-firm variation in ownership structure induced by foreign acquisitions in Spain to provide a new angle on the relationship among foreign ownership, technology, and skills. We first develop a model in which heterogeneous firms decide endogenously about the level of technology, the share of high-skilled workers, and the level of worker training. Foreign-owned firms implement better technology than domestically owned firms due to access to foreign markets through the foreign parent. This market size effect, coupled with a technology-skill complementarity, raises the demand for high-skilled workers as well as worker training upon acquisition. The largest productivity gains predicted by the model accrue to those firms that optimally combine better technology with a larger share of high-skilled workers in production and a better trained workforce. We test these predictions on a longitudinal data set of Spanish manufacturing firms. Combining firm fixed effects with a suitable propensity score weighting estimator, we find empirical evidence that foreign-acquired firms, not only increase their technology level, but also engage in skill upgrading upon acquisition (through both hiring and training). Moreover, we show that these changes are driven by the market size effect, and not by changes in the ownership structure per se. Finally, we reveal a technology-skill complementarity in the data implying that the productivity gains associated with better technology are magnified for firms actively engaging in skill upgrading. Overall, our paper provides strong evidence for the notion that foreign MNEs "inject" skill-biased technological change into their affiliated firms.

KW - Multinational Enterprises, Mergers and Acquisitions, Skill-biased Technological Change, Worker Training Productivity

M3 - Working paper

T3 - Economics Working Papers

BT - Foreign Ownership and Skill-biased Technological Change

PB - Institut for Økonomi, Aarhus Universitet

CY - Aarhus

ER -