This paper examines whether and, if so, why source country heterogeneity exists in foreign direct investment. Using detailed Swedish matched employer‐employee data for the period from 1996 to 2009, we find statistical evidence that affiliate performance differs systematically across source countries. We then show that differences in foreign multinational enterprises’ global management practices (estimated from the new firm‐level data from the World Management Survey) are an important determinant of productivity among foreign affiliates.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper examines whether and, if so, why source country heterogeneity exists in foreign direct investment (FDI). Using detailed data on all Swedish firms for the period from 1996 to 2009, we find statistical evidence that affiliate performance differs systematically across source countries. For instance, affiliates of US multinational enterprises (MNEs) are, on average, approximately three times more productive than affiliates headquartered in the Nordic countries. One possible explanation for these discrepancies is differences in organization practices across source countries. Using new firm-level data from the World Management Survey to estimate a global index of the quality of management practices for MNEs with headquarters in our source countries of interest, we find that source country heterogeneity in affiliate performance is highly correlated with differences in management practices. Terms of use: Documents in JEL: F21, F23, L1, M1