Productivity Effects of Foreign Acquisitions in Swedish Manufacturing: The FDI Productivity Issue Revisited

This study analyzes the difference between foreign and domestic ownership of firms with respect to productivity. Recent literature has shown that it is important to study the counter-factual outcome, i.e. what would the outcome be had the domestic firm never been acquired? The analysis is based on a panel of Swedish firm level data. In order to isolate the casual effects due to a takeover a propensity score matching estimator is applied to compare similar treated and untreated firms. The difference-in-difference estimations show that there is a positive effect of foreign acquisition on productivity. Foreign acquisitions increase the productivity in the acquired Swedish firms by between 3 and 11% depending on the estimator chosen. Moreover, this productivity difference does not occur immediately but starts between 1-5 years post acquisition.