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Innovation, foreign ownership and multinationality. An empirical analysis on Italian manufacturing firms

By Davide Castellani and Antonello Zanfei


Combining evidence on the ownership structure, internationalisation and economic performance of Italian manufacturing companies with microdata from the second Community Innovation Survey, this paper highlights that significant differences exist in productivity and innovatory behaviour of (foreign and domestic-owned) multinationals relative to domestic uni-national firms in Italy. However, while higher productivity is diffuse throughout all firms belonging to multinational groups, crucial innovative activities, including R&D, product innovation, patenting and technological cooperation with local firms and Universities are more likely in Italian MNEs than in foreign-owned firms in Italy. This suggests that it is highly desirable that the share of dynamic domestic multinationals grows in the Italian manufacturing industry, but it does not necessarily mean that a lower inflow of foreign capital is also desirable. In fact, we find no evidence that incoming foreign firms are taking over the most innovative and productive domestic firms. Hence they appear to add to, much more than substitute for, domestic technological activity. A case could probably be made for a better promotion and selection of inward investments, as to favour entry of higher value added activity

Topics: multinational firms, productivity, innovative behaviour1. Introduction
Year: 2003
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