Re-investment and the survival of foreign-owned plants

Abstract

Foreign-owned plants have higher conditional exit rates, but this paper tests the hypothesis that re-investment "embeds" these plants, leading to significantly longer survival time durations. A unique dataset is used for 265 plants that commenced in foreign ownership after 1985 in North East England, distinguishing between start-up ("greenfield") and acquisition plants. Survival is measured at 2000, and the paper analyses the duration to the first reinvestment and survival, allowing for selection into the multiple investment state. It finds that re-investment increases the lifetime of start-up plants, but this is insignificant once selection is controlled for, while for acquisition plants there is no difference. Grants affect selection, but not the survival of start-up plants. The paper offers little support for re-investment as a source of "embeddedness".JEL classification: O12, L20, R58

Prior to reshoring: A duration analysis of foreign manufacturing ventures

“…Our results reveal a significant home region effect (Rugman & Oh, 2013): EU companies exhibit a shorter duration offshore, in accordance with previous findings on the duration of foreign joint ventures (Jiang et al, 2011) and of acquired foreign plants (Wren & Jones, 2009). This result may be explained by the different organizational archetypes adopted by US and EU companies to manage their subsidiaries.…”

“…Dunning (2000) argues that changing country specific comparative advantages give rise to relocations of production elsewhere and influence the duration of the offshore stay. The literature has identified both home country (Wren & Jones, 2009;Jiang et al, 2011) and host country effects (Mata & Portugal, 2000;Jiang et al, 2009Jiang et al, , 2011 as relevant determinants of duration. High country risk, in terms of political instability or low intellectual property right protection, is expected to shorten the duration of the offshore experience.…”

“…International Business (IB) research has analysed the duration of specific foreign ventures (e.g., joint ventures, licensing agreements, plants, subsidiaries) (Habib & Mella-Barral, 2007;Jiang et al, 2009;Mata & Portugal, 2000;Wren & Jones, 2009) but the focus has never been on the reshoring exit strategy. This paper attempts to fill the aforementioned literature gap.…”

Value creation and value capture in the automotive industry: Empirical evidence from Czechia

“…At the same time, profit reinvestments, which increase capital and technology intensity of production, should lead to increases in marginal labor productivity and, therefore, wages. Profit reinvestments may also increase the embeddedness of plants in particular locations (Wren and Jones, 2009) by fostering local linkages and developing nonproduction functions.…”

“…For example, the investment in a more advanced technology should translate into higher marginal labor productivity and higher wages (Szalavetz, 2005). Repeat investments can also enhance ties of foreign-owned plants to particular regional economies and extend the survival time durations of foreign-owned plants in host regions (Wren and Jones, 2009). We measure reinvested profits indirectly through the annual change in tangible assets, which includes repeated investment into buildings, machines and equipment, and also their depreciation.…”