Working Paper: NBER ID: w17141
Authors: Laura Alfaro; Maggie Chen
Abstract: We examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that, first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in non-crisis years.
Keywords: Foreign Ownership; Establishment Performance; Global Financial Crisis
JEL Codes: F1; F2; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Foreign ownership (F23) | MNC subsidiaries' sales growth rates during the crisis (F23) |
| Foreign ownership (F23) | MNC subsidiaries' sales growth rates in noncrisis years (F23) |
| Stronger vertical production linkages (F12) | MNC subsidiaries' performance during the crisis (F23) |
| Financial linkages (F65) | MNC subsidiaries' performance during the crisis (F23) |
| Financial linkages (F65) | MNC subsidiaries' performance in noncrisis years (F23) |