Economic slowdowns,hazard rates and foreign ownership |
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| Institution: | 1. Department of Economics, Management and Industrial Engineering, GOVCOPP, University of Aveiro, 3810-193 Aveiro, Portugal;2. Department of Economics, Management and Industrial Engineering, University of Aveiro, 3810-193 Aveiro, Portugal;3. Faculty of Economics of University of Porto, Rua Dr. Roberto Frias, 4200-464 Porto, Portugal;1. Universidad Rey Juan Carlos, Facultad de Ciencias Jurídicas y Sociales, Departamento de Economía de la Empresa (ADO), Paseo de los Artilleros s/n, 28032 Madrid, Spain;2. Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Departamento de Organización de Empresas, Pozuelo de Alarcón, 28223 Madrid, Spain;1. Department of Marketing BI Norwegian Business School, 0442 Oslo Norway;2. College of Business and Management, Saginav Valley State University, MI 48710, USA;3. Department of Marketing, BI Norwegian Business School 0442 Oslo Norway;1. Department of Business Administration & Institute of International Business, National Cheng Kung University, Tainan 70101, Taiwan, ROC;2. Nonaka Centre for Knowledge and Innovation, CUNEF, Complutense University of Madrid, Serrano Anguita 8, 28004, Madrid, Spain;1. Department of Management and Marketing, University of Melbourne, 198 Berkeley Street, Melbourne, VIC 3010, Australia;2. Research School of Management, Australian National University, LF Crisp, Building 26, ACT 0200, Australia |
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| Abstract: | This paper evaluates the link between foreign ownership and firm exit during crises, using a longitudinal micro dataset over an 18-year period. We address two main questions: first, if foreign affiliates have different failure rates than domestic firms during economic downturns, and second if the foreignness effect differs between two different economic downturns. The results partially confirm the liability of foreignness argument, suggesting that when the crisis was more pronounced at home than abroad, the differences in hazard rates between foreign and domestic firms reduce. The footloose argument is also only partially confirmed. For policy makers, our results on survival dynamics during crises are not against policies stimulating inward investment. There is no need to fear that foreign firms destabilize more than usual the host economy during economic slowdowns by immediately closing down operations. |
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| Keywords: | Economic slowdowns Foreign ownership Hazard rates Manufacturing Portugal |
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