FDI, Ownership Structure, and Productivity

         
Author Name ITO Tadashi (Gakushuin University) / TANAKA Ayumu (Research Associate, RIETI)
Creation Date/NO. March 2020 20-E-017
Research Project Studies on Foreign Direct Investment and Trade in Relation to FDI
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Abstract

The standard firm heterogeneity model of FDI considers the case of whole ownership of foreign affiliates. However, there exist many partially-owned foreign affiliates. This paper builds a model based on Helpman et al. (2004) to allow various ownership structures and posits some testable hypotheses on the relationship between productivity and ownership shares/structures. The empirical part corroborates these hypotheses, showing that high productivity firms have higher ownership share in their affiliates and lower productivity firms tend to opt for joint-ventures with wholesalers and/or local/3rd country partners.