The Impact of Acquiring Control on Productivity

47 Pages Posted: 2 Jan 2005

See all articles by Francisco Perez-Gonzalez

Francisco Perez-Gonzalez

National Bureau of Economic Research (NBER); Instituto Tecnológico Autónomo de México (ITAM)

Date Written: December 2004

Abstract

Empirical studies on the importance of control rights on efficiency are hindered by actual - presumably efficient - ownership patterns. Finding settings where the right owner does not own the right asset and where ownership arbitrarily changes is challenging. In this paper I aim at overcoming these problems by investigating the elimination of foreign majority ownership restrictions in Mexico. Specifically, I study the performance of affiliates of multinational corporations for which (1) ownership restrictions appeared to bind before they were lifted, and (2) parent ownership increased from minority to majority as the reform was implemented. Using detailed plant-level information, I find that multinational control leads to large improvements in total factor productivity, particularly in industries that rely on technological innovations from their parent companies. Control is also associated with higher investment - particularly in technology intensive forms of production - and with an improvement in the skill profile of the labor force. Overall, I interpret the evidence as supportive of the property rights theory of the firm.

Keywords: corporate control, ownership, property rights, multinational corporations, foreign direct investment, Mexico

JEL Classification: D23, D24, F23, G34, G38

Suggested Citation

Perez-Gonzalez, Francisco, The Impact of Acquiring Control on Productivity (December 2004). Available at SSRN: https://ssrn.com/abstract=642321 or http://dx.doi.org/10.2139/ssrn.642321

Francisco Perez-Gonzalez (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Instituto Tecnológico Autónomo de México (ITAM) ( email )

Av. Camino a Sta. Teresa 930
Col. Héroes de Padierna
Mexico City, D.F. 01000, Federal District 01080
Mexico

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