Foreign Acquisition and Firm Productivity: Evidence from Slovenia

Abstract

This paper investigates the impact of foreign acquisition on the productivity of Slovenian manufacturing firms subject to takeover in 1997. It finds evidence that foreign investors acquire those enterprises with higher productivity, that are more inclined to export and that operate in more concentrated industries. It then controls for the estimation bias induced by this non-random selection process by applying the combined propensity score matching and difference-in-differences estimation technique. The results of the empirical analysis show no robust statistical evidence of a positive causal effect of foreign acquisition up to two years following takeover. This finding suggests that a transfer of intangible assets from foreign firms to their Slovenian affiliates does not take place over this time period. Copyright 2008 The Author. Journal compilation Blackwell Publishing Ltd. 2008.

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