Barbarians at the Gate? FDI and Target Firms’ Management Quality

We analyse whether firms targeted by a foreign investor improve their management quality and practices after the acquisition, focusing on Foreign Direct Investments (FDI) occurring in Italy between 2010 and 2020. To proxy management quality, we resort to granular data on ISO certificates held by firms and find that those acquired by foreign investors experience an improvement in management standards, regardless of the country from which the FDI originates. This is not the case for firms involved in domestic M&As. Our empirical strategy controls for ex ante selection, and our findings show that the positive effects of FDI documented in the literature can be partly attributed to improved managerial practices implemented in target firms