Foreign ownership and skill-biased technological change

Abstract

Understanding the effects of foreign direct investment and the behavior of multinational enterprises (MNEs) is a core issue in the study of international economics. We exploit within-firm variation in ownership structure induced by foreign acquisitions in Spain to provide a new angle on the relationship among foreign ownership, technology, and skills. We first develop a model in which heterogeneous firms decide endogenously about the level of technology, the share of highskilled workers, and the level of worker training. Foreign-owned firms implement better technology than domestically owned firms due to access to foreign markets through the foreign parent. This market size effect, coupled with a technology-skill complementarity, raises the demand for high-skilled workers as well as worker training upon acquisition. The largest productivity gains predicted by the model accrue to those firms that optimally combine better technology with a larger share of high-skilled workers in production and a better trained workforce. We test these predictions on a longitudinal data set of Spanish manufacturing firms. Combining firm fixed effects with a suitable propensity score weighting estimator, we find empirical evidence that foreign-acquired firms, not only increase their technology level, but also engage in skill upgrading upon acquisition (through both hiring and training). Moreover, we show that these changes are driven by the market size effect, and not by changes in the ownership structure per se. Finally, we reveal a technology-skill complementarity in the data implying that the productivity gains associated with better technology are magnified for firms actively engaging in skill upgrading. Overall, our paper provides strong evidence for the notion that foreign MNEs "inject" skill-biased technological change into their affiliated firms.

Firm Exports, Foreign Ownership, and the Global Financial Crisis

“…To this end we exploit a specific question in the ESEE survey that directly asks whether firms rely on the distribution network of their foreign parents for exporting. This question is unique to the ESEE data set and makes it a particularly valuable tool for studying the role of foreign ownership for exports (for other studies exploiting this feature of the data set see Guadalupe et al, 2012;Koch and Smolka, 2019). The question appears in the survey every four years, which allows us to study two related yet distinct aspects of the market access channel: First, we study the evolution of export shares through the crisis conditional on the use of the parent's distribution network as reported in 2006 (i.e., before the crisis).…”

The Political Economy of Skilled Workers and Innovation

“…Balsmeier and Woerter (2019) uses Swiss data to show that increases in digitalization at the firm level (e.g., robots or 3D printing) increases demand of more highly skilled workers. Finally, Koch and Smolka (2019) add in an international dimension to the SBTC by examining firm-level data from Spain to find that foreign firms will enter domestic production to both acquire innovation and thus increase the demand for high-skilled workers.…”

Energy- and Environment-Biased Technological Progress Induced by Different Types of Environmental Regulations in China

“…For biased/directed technical progress following from Hicks's "Induced Innovation" [29] and Sato's "factor-augmenting technical progress" [30], to date, studies have paid more attention to the evaluation of labor-and capital-biased technical progress [31][32][33][34], or alternatively focused on higher or lower skill (ability)-biased innovation [35][36][37]. In Acemoglu [38][39][40], the definition of "biased technological progress" is clearly provided.…”