The impact of inward FDI on local companies’ labour productivity: evidence from the Italian case

Abstract

The article aims to investigate the impact of inward foreign direct investment (FDI) occurring through acquisition upon the local target company’ performance, as measured by labour productivity. It relies upon the idea that multinational enterprises (MNEs) act as a device to transfer firm‐specific proprietary assets, thus causing their subsidiaries to exhibit better performance than their host country rivals. Specifically, our results show that foreign acquisitions generally increase the local target companies’ labour productivity in the medium term after the acquisition. The empirical evidence refers to foreign acquisitions that occurred in Italy in the period 1994–1997.

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