Multinational Firms and Job Tasks

We use Swedish matched employer-employee data to analyze the impact of multinational activity and foreign acquisitions on the relative demand for different job tasks. We contribute to the literature by using a conceptualization from the recent literature in international economics and define the division of labor in terms of job tasks. Our econometric results show that multinational firms, both foreign and domestic, are associated with higher shares of non-routine tasks and tasks requiring personal interaction than local firms. Moreover, acquisitions of local firms by both foreign and domestic MNEs tend to increase the relative demand for non-routine and interactive job tasks, i.e. tasks that are not easily offshored. As a comparison, dividing labor according to educational attainment does not capture the found effects on relative labor demand.FDI; Cross-Border Acquisitions; Multinational Enterprises; Foreign Ownership; Job Tasks; Labor Demand; Skill Groups

Should R&D Champions be Protected from Foreign Takeovers?

We analyze how the entry mode of Foreign Direct Investments (FDI) affects affiliate R&D activities. Using unique affiliate level data for Swedish multinational firms, we first present empirical evidence that acquired affiliates have a higher level of R&D intensity than greenfield (start-up) affiliates. This gap persists over time and with the age of the affiliates, as well as for different firm types and industries. To explain this finding, we develop an acquisition-investment-oligopoly model where we show that for a foreign acquisition to take place in equilibrium, the acquiring MNE must invest sufficiently in sequential R&D in the affiliate. Otherwise, rivals will expand their business, thus making the acquisition unprofitable. Two additional predictions of the model – that foreign firms acquire high-quality domestic firms and that the gap in R&D between acquired and greenfield affiliates decreases in acquisition transaction costs – are consistent with the data.FDI; M&A; Multinational firms; R&D

The expected economic impacts of the EU-Canada Comprehensive Economic and Trade Agreement in Finland

The CETA agreement aims to remove especially various non-tariff measures (NTMs) on trade and investment stemming from regulatory practices, in addition to the nearly full elimination of tariffs between the EU and Canada. This report analyses the expected impacts of the agreement to the Finnish economy with a GTAP CGE model and microdata analyses on the current trade structures. The expected GDP impact of 0.04 percent to Finland is slightly higher than the EU average (0.03 percent). In terms of value added, most sectors in Finland grow minimally as a result of the CETA. The highest bilateral trade effects are found for motor vehicles and transport equipment industries where both bilateral exports and imports are expected to increase by over 100 percent. Further, the extensive liberalisation of services trade is likely to have some positive effects for Finland as some 30-50 percent of the current domestic value added from Finnish exports to Canada originated from service exports. Even nearly total opening of public procurement markets to EU exporters in Canada is not, again, likely to result in very large benefits for EU firms in absolute terms, while some increases are possible. The reduction of fixed and marginal costs of exporting in the CETA agreement is likely to open the Canadian market to Finnish SME exporters, which have not entered the Canadian market as well as other export markets until now

The economic impact of EU free trade agreements for Finland and the EU

Economic policies of the European Union (EU) are based on promoting open and predictable international trade. EU Free Trade Agreements (FTA) is an important tool for achieving this objective. In this study, we analyse the impact of the EU FTAs on goods and services, value added, direct investment, employment and gross domestic product (GDP) in Finland. We focus on estimating the economic impact of the FTAs concluded during Finland's EU membership since 1995. The analysis shows that Finland's exports have increased markedly in many countries that have entered into FTAs with the EU since 1996, but the increase in exports seems to be explained by the general globalisation of trade rather than FTAs. At the aggregate level, our results suggest that the FTAs that came into force since 1988 have significantly increased EU trade with partner countries. The most comprehensive FTA has increased EU exports to partner countries by around 34% and imports by 14%. The larger average effects on EU trade are explained at least in part by the importance of the agreements concluded before Finland's membership of the EU. However, although the EU FTAs have had a weaker effect on Finland's exports than on EU countries on average, they have increased exports in some industries significantly. The industries that have benefited most from the EU FTAs are forest industry, machine and equipment manufacturing, and business services that support trade in goods. In addition, agreements have increased production in Finland through global value chains. For trade in goods, the effect of free trade agreements, concluded after 2004, on value added in Finland is estimated at around 1.6% of total value added in export sales, which is slightly below the EU average of 2.0%. We also find that the agreements have contributed positively to foreign direct investment, trade in services, employment and GDP. Our results support the use of FTAs as a tool for economic policy, but the scope and depth of the agreements and the functioning of other international institutions are crucial how large impact they have on trade. Not even the broader agreements can replace the transparency, predictability and dispute resolution mekamism provided by the World Trade Organisation, WTO. That is why the EU should strive, not only for new and comprehensive free trade agreements, but also to support the continuation of WTO reforms and to guarantee its ability to act in the future

Multinationals, Competition and Productivity Spillovers through Worker Mobility

Spillovers can arise when multinational firms (MNEs) train local employees who later join domestic firms, bringing with them part of the technological, marketing and managerial knowledge they have acquired. Fosfuri et al. (2001) suggest that the direction and the intensity of the worker mobility, and its associated spillovers, are affected by the degree of product market competition. In this paper, we assess empirically the importance of this hypothesis for the first time by using the Finnish longitudinal employeer-employee data. We first quantify the importance of spillovers via worker mobility by estimating augmented production functions. Second, we analyse the impact of product market competition and absorptive capacity on worker mobility by estimating several competing risks models. We find that productivity spillovers arise only when workers move from MNEs to purely domestic firms in high-tech industries. Further, in line with predictions of Fosfuri et al, our results show that competition reduces worker mobility. This details a channel through which competition may affect total factor productivity of purely domestic plants adversely. Second Edition updated in September 2014.Tuottavuuden ulkoisia sivuvaikutuksia voi syntyä, kun työntekijät siirtyvät monikansallisista yrityksistä paikallisten yritysten palvelukseen ja tuovat mukanaan osan edellisen työnantajan teknologia-, markkinointi- ja johtamisosaamisesta. Fosfuri et al. (2001) teoreettinen malli osoittaa, että tuotemarkkinakilpailu vaikuttaa työntekijöiden liikkuvuuden suuntaan ja intensiteettiin sekä siitä syntyviin sivuvaikutuksiin. Tutkimuksemme on ensimmäinen, jossa arvioidaan empiirisesti hypoteesin merkittävyyttä käyttäen suomalaista pitkittäistä työnantaja-työntekijä aineistoa. Ensiksi määritämme työntekijöiden liikkuvuudesta syntyvien ulkoisten sivuvaikutusten tärkeyttä estimoimalla laajennettuja tuottavuusfunktioita. Toiseksi analysoimme tuotemarkkinakilpailun ja absorptiokapasiteetin vaikutusta työntekijöiden liikkuvuuteen estimoimalla useita 'competing risk' -malleja. Tuloksemme osoittavat, että tuottavuuden sivuvaikutuksia syntyy ainoastaan silloin, kun työntekijöitä siirtyy monikansallisista yrityksistä paikallisiin yrityksiin korkeateknologia-aloilla. Lisäksi Fosfuri et al. ennusteiden mukaisesti tuloksemme osoittavat, että kilpailu vähentää työntekijöiden liikkuvuutta. Täten kilpailu voi vaikuttaa paikallisten yritysten tuottavuuteen haitallisesti. Toinen painos, julkaistu syyskuussa 2014