Prof. Holger Görg, Ph.D.
Holger Görg is Professor of International Economics at Christian-Albrechts-University Kiel, and the Kiel Institute for the World Economy.
Before joining Kiel he was at University College Cork, University of Ulster, and Nottingham University, where he still retains an affiliation as research fellow in the Leverhulme Centre for Research on Globalisation and Economic Policy (GEP). He is also affiliated with the Tuborg Research Centre for Globalisation and Firms at Aarhus University, and IZA. He completed a Ph.D. in Economics in 1999 at the University of Dublin, Trinity College.
His main research interests are in applied international trade issues, in particular related to foreign direct investment, international outsourcing, trade and labour markets. He received the Gossen Award from the German Economic Association (Verein für Socialpolitik) in 2009.
Christian-Albrechts-University of Kiel
Department of Economics
Phone: +49 431 880-1790
Fax: +49 431 880-1618
Kiel Institute for the World Economy
By arrangement per E-Mail
Christian-Albrechts-University of Kiel
Department of Economics
Phone: +49 431 880-2604
Fax: +49 431 880-2608
Recent Edited Volume
Selected Recent Papers in Refereed Journals
Görg, H., D. Baumgarten and I. Geishecker, “Offshoring, Tasks, and the Skill-Wage Pattern.”, European Economic Review, No. 61, 2013, pp. 132–152
Abstract: The paper investigates the relationship between offshoring, wages, and the occupational task profile using rich individual-level panel data. Our main results suggest that, when only considering within- industry changes in offshoring, we identify a moderate wage reduction due to offshoring for low-skilled workers, though wage effects in relation to the task profile of occupations are not estimated with sufficient precision. However, when allowing for cross-industry effects of offshoring, i.e. allowing for labor mobility across industries, negative wage effects of offshoring are quite substantial and depend strongly on the task profile of workers’ occupations. A higher degree of interactivity and, in particular, non-routine content effectively shields workers against the negative wage impact of offshoring.
Geishecker, I. and H. Görg, “Services offshoring and wages: Evidence from micro data”, Oxford Economic Papers, No. 65(1), 2013, pp. 124–146
Abstract: This paper investigates the effects of services offshoring on wages using individual level data combined with industry information on offshoring. Our results show that services offshoring affects the real wage of low and medium skilled individuals negatively. By contrast, skilled workers benefit from services offshoring in terms of higher real wages. Hence, offshoring has contributed to a widening of the wage gap between skilled and less skilled workers. This result is obtained while controlling for individual and sectoral observed and unobserved heterogeneity. In particular, our empirical model also controls for the impact of technological change and offshoring materials.
Godart, O., H. Görg and D. Greenaway, “Domestic Multinationals, Foreign Affiliates, and Labour Demand Elasticities”, Review of World Economics, No. 149(4), 2013, pp. 611–630
Abstract: Using information on a panel of multinational firms operating in the United Kingdom from 1996 to 2005, we find that labour demand in domestic multinationals is less sensitive to labour cost changes than in foreign multinationals. This difference in the wage elasticity of labour demand persists even when we control for the skill intensity of firms or their level of intangible assets. This is in line with an interpretation that the provision of headquarter services in domestic multinational firms protects against strong fluctuations in labour demand. Overall, our results suggest that the wage elasticity of labour demand is about 40 percent lower in domestic than in foreign multinationals.
Godart, O., H. Görg and A. Hanley, “Surviving the crisis: foreign multinationals vs domestic firms”, The World Economy, No. 35(10), 2012, pp. 1305–1321
Abstract: Starting from the observation that all firms in Ireland (foreign and domestic in manufacturing and services industries) were hit by the crisis, the paper asks whether there is a difference in the behaviour of foreign and domestic firms. One hypothesis is that foreign multinationals are less linked into the Irish economy, so more likely to leave once the economy is hit by a negative shock. The paper discusses background hypotheses before giving empirical evidence from firstly aggregate data, and secondly firm-level observations. The analysis of the latter suggests that foreign firms are not more likely to leave during the crisis than Irish firms. Some policy conclusions are offered in the paper.
Görg, H. and M. - E. Spaliara, “Financial Health, exports, and firm survival: Evidence from UK and French firms”, Economica, 2012
Abstract: We examine the differential effects of financial status and exporting activity on the likelihood of survival for firms in the UK and France – two countries with different financial systems. We aim to answer two main questions: What is the direct impact of financial characteristics and different facets of exporting activity on the likelihood of survival? Do the sensitivities of survival incidence to financial variables vary with the exporting status of firms? We find strong evidence that continuous exporters face a higher probability of survival compared to starters, continuous non-exporters and firms exiting the exporting market. Further, important sensitivities of survival prospects to financial indicators are observed for the UK firms which might be explained by the “market based” economy. Finally, a within and across countries comparison reveals that the survival of exporting groups varies substantially depending on firms' financial status, the financial system and the prolonged participation in the export market.
Debaere, P., H. Görg and H. Raff, “Greasing the Wheels of International Commerce: How Services Facilitate Firms' International Sourcing”, Canadian Journal of Economics, Vol. 46, No. 1, 2013, pp. 78–102
Abstract: We use unique plant-level data to study the link between the local availability of services and the decision of manufacturing firms to source materials from abroad. To guide our empirical analysis we develop a monopolistic-competition model of the materials sourcing decisions of heterogeneous firms. The model generates predictions about how the intensity of international sourcing of materials depends on a firm's productivity and the availability of local services. These predictions are supported by the data. We find evidence that more productive manufacturing firms tend to have a higher ratio of imported materials to sales. In addition, we find evidence that services grease the wheels of international commerce: A greater availability of services across regions, industries and time increases a firm's foreign sourcing of materials relative to sales. Interestingly, this positive impact of local service availability on imports especially applies to stand-alone firms that, unlike multinationals, are less likely to rely on imported or internally provided services.
Alvarez, R. and H. Görg, “Multinationals as Stabilizers? Economic Crisis, Access to Finance, and Employment Growth”, Journal of Development Studies, No. 48(7), 2012, pp. 847–863
Abstract: This paper examines the comparative response of multinationals and domestic firms to an economic crisis, using the empirical setting of a well defined case of economic slowdown in Chile. We find that employment in manufacturing plants has been drastically reduced during the economic crisis. Our findings reveal that multinationals are more likely to exit contributing to the employment contraction during the crisis, but surviving foreign firms experience lower employment reductions than domestic enterprises. These results are not fully consistent with idea that multinationals are less affected by an economic crisis and that they may be able to act as stabilizers.
Barrios, S., H. Görg and E. Strobl, “Spillovers through backward linkages from multinationals: Measurement matters!”, European Economic Review, Vol. 55, No. 6, 2011, pp. 862–875
Abstract: We argue that the measures of backward linkages used in recent papers on spillovers from multinational companies are potentially problematic, as they depend on a number of restrictive assumptions, namely that (i) multinationals use domestically produced inputs in the same proportion as imported inputs, (ii) multinationals have the same input sourcing behaviour as domestic firms, irrespective of their country of origin, and (iii) the demand for locally produced inputs by multinationals is proportional to their share of locally produced output. We discuss why these assumptions are likely to be violated in practice, and provide alternative measures that overcome these drawbacks. Our results, using plant level data for Ireland, show clearly that the choice of backward linkage measure and thus, the assumptions behind them, matters greatly in order to draw possible conclusions regarding the existence of FDI-related spillovers. Using the standard measure employed in the literature we fail to find robust evidence for spillovers through backward linkages. However, when we use alternative measures of backward linkages that relax assumptions (i)-(iii), we find robust evidence for positive FDI backward spillover effects.
Görg, H. and P. Labonte, “Trade protection during the crisis: Does it deter foreign direct investment?”, The World Economy, Vol. 35, No. 5, 2012, pp. 525-544
Abstract: This paper looks empirically at the implications that protectionist measures implemented during the current crisis may have had for a country’s ability to attract foreign direct investment. The research utilizes data on such measures that is available from Global Trade Alert, combined with bilateral FDI data between OECD countries and a large number of partner countries for 2006 to 2009. This allows us to examine the short run effect that protectionist measures may have had on bilateral FDI flows. The verdict from this analysis is clear: a country that implements new protectionist measures may expect that this may result in lower foreign direct investment inflows into the economy. The point estimates from our preferred specifications suggest that, depending on the empirical model, the implementation of a trade protection measure is associated with about 40 to 80 percent lower FDI inflows. Trade protection does not appear to have any implications for the country’s FDI outflows, however. The negative effect on FDI inflows does not appear to be due to direct investment measures but rather to actions related to intellectual property rights protection and other more trade related measures.
Bitzer, J., H. Görg and P. Schröder, “Can trade really hurt? An empirical follow-up on Samuelson's controversial paper.”, Economic Inquiry, Vol. 50, No. 3, 2012, pp. 724–738
Abstract: This paper investigates Samuelson's (JEP, 2004) argument that technical progress of the trade partner may hurt the home country. We illustrate this prospect in a simple Ricardian model for situations with outward knowledge spillovers. Within this framework Samuelson's “Act II” effects may occur. Based on industry level panel data for seventeen OECD countries for the period 1973 to 2000 we show econometrically that the outflow of domestic knowledge via exports or FDI may have a negative impact on industry output in the home country. This is particularly so when exporting to technological less advanced countries and, more specifically, China.
Figini, P. and H. Görg, “Does foreign direct investment affect wage inequality? An empirical investigation”, The World Economy, Vol. 34, No. 9, 2011, pp. 1455–1475
Abstract: We use a panel of more than 100 countries for the period 1980 to 2002 to analyse the relationship between inward foreign direct investment (FDI) and wage inequality. We particularly check whether this relationship is non-linear, in line with a theoretical discussion. We find that the effect of FDI differs according to the level of development: we depict two different patterns, one for OECD (developed) and one for non-OECD (developing) countries. Results suggest the presence of a non linear effect in developing countries; wage inequality increases with FDI inward stock but this effect diminishes with further increases in FDI. For developed countries, wage inequality decreases with FDI inward stock and there is no robust evidence to show that this effect is non-linear.
Girma, S., Y. Gong, H. Görg and Z. Yu, “Can production subsidies foster export activity? Evidence from Chinese firm level data”, Scandinavian Journal of Economics, Vol. 111, No. 4, 2009, pp. 863–891
Abstract: It is widely accepted that China has been experiencing an export-led growth approach. However, the question whether government can reshape industry structure through production subsidies to enhance export performance has not been answered. This paper analyses the impact of production subsidies on firms’ export performance using a very comprehensive and recent firm level database and controlling for the endogeneity of subsidies. It documents robust evidence that production subsidies stimulate export activity, although this effect is conditional on firm characteristics. In particular, the beneficial impact of subsidies is found to be more pronounced amongst profit-making firms, firms in capital intensive industries and those located in non-coastal regions. Compared to firm characteristics, the extent of heterogeneity across ownership structure (SOEs, collectives and privately-owned firms) proves to be relatively less important.
Girma, S., H. Görg and J. Wagner, “Subsidies and exports in Germany: First evidence from enterprise panel data”, Applied Economics Quarterly / Konjunkturpolitik, Vol. 55, No. 3, 2009, pp. 179–195
Abstract: We use newly available representative panel data for manufacturing enterprises in West and East Germany to investigate the link between production-related subsidies and exports. We document that only a small fraction of enterprises is subsidized, and that exports and subsidies are positively related. Using a matching approach to investigate the causal effect of subsidies on export activities we find no impact of subsidies on the probability to start exporting, and only weak evidence for an impact of subsidies on the share of exports in total sales in West Germany but no evidence in East Germany.
Görg, H., M. Henry, E. Strobl and F. Walsh, “Multinational companies, backward linkages and labour demand elasticities”, Canadian Journal of Economics, Vol. 42, No. 1, 2009, pp. 332–348
Abstract: This paper investigates the link between nationality of ownership and wage elasticities of labour demand at the level of the plant. In particular, we examine whether labour demand in multinationals becomes less elastic with respect to the wage if the plant has backward linkages with the local economy. Our empirical evidence, based on a rich plant level dataset, shows that the extent of local linkages indeed generally reduces the wage elasticity of labour demand. This result is economically important and holds for a number of different specifications.
Görg, H., M. Henry and E. Strobl, “Grant support and exporting activity”, Review of Economics and Statistics, Vol. 90, No. 1, 2008, pp. 168–174
Abstract: This paper investigates whether government support can act to increase exporting activity. We use a uniquely rich data set on Irish manufacturing plants and employ an empirical strategy that combines a non-parametric matching procedure with a difference-in-differences estimator in order to deal with the potential selection problem inherent in the analysis. Our results suggest that if grants are large enough they can encourage already exporting firms to compete more effectively on the international market. However, there is little evidence that grants encourage non-exporters to start exporting.
Hijzen, A., H. Görg and M. Manchin, “Cross-border mergers & acquisitions and the role of trade costs”, European Economic Review, Vol. 52, No. 5, 2008, pp. 849–866
Abstract: Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in the number of cross-border mergers and acquisitions. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether trade costs affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.
Görg, H., A. Hanley and E. Strobl, “Productivity effects of international outsourcing: Evidence from plant level data”, Canadian Journal of Economics, Vol. 41, No. 2, 2008, pp. 670–688
Abstract: We investigate the impact of international outsourcing on productivity using plant level data for Irish manufacturing. Specifically, we distinguish the effect of outsourcing of materials from services inputs. Moreover, we examine whether the impact on productivity is different for plants being more embedded in international markets through exporting or being part of a multinational. Our results show robust evidence for positive effects from outsourcing of services inputs for exporters, either domestic- or foreign-owned. By contrast, we find no statistically significant evidence of an impact of international outsourcing of services on productivity for firms not operating on the export market.
Girma, S., H. Görg and M. Pisu, “Exporting, linkages and productivity spillovers from foreign direct investment”, Canadian Journal of Economics, Vol. 41, No. 1, 2008, pp. 320–340
Abstract: In this paper we analyse productivity spillovers from foreign direct investment using firm level panel data UK manufacturing industries from 1992 to 1999. We investigate spillovers through horizontal, backward and forward linkages, distinguish spillovers from export oriented vs domestic market oriented FDI, and allow for differing effects depending on domestic firms’ export activities. The results suggest that the mechanisms through which spillovers affect domestic firms are very complex and that there are substantial differences in spillover benefits for domestic exporters and non-exporters, and from different types of inward investment.
Geishecker, I. and H. Görg, “Winners and losers: A micro-level analysis of international outsourcing and wages”, Canadian Journal of Economics, Vol. 41, No. 1, 2008, pp. 243–270
Abstract: Our paper investigates the link between international outsourcing and wages utilizing a large household panel and combining it with industry-level information on industries' outsourcing activities from input-output tables. This approach avoids problems such as aggregation bias, potential endogeneity bias, and poor skill definitions that commonly hamper industry-level studies. We find that outsourcing has had a marked impact on wages. Applying two alternative skill classifications, we find evidence that a 1 percentage point increase in outsourcing reduced the wage for workers in the lowest skill categories by up to 1.5%, while it increased wages for high-skilled workers by up to 2.6%. This result is robust to a number of different specifications.
Girma, S., Y. Gong and H. Görg, “Foreign direct investment, access to finance, and innovation activity in Chinese enterprises”, World Bank Economic Review, Vol. 22, No. 2, 2008, pp. 367–382
Abstract: This paper investigates the link between inward FDI and innovation activity in China, using a very comprehensive and recent firm level database. We pay particular attention to the impact of domestic access to finance. Our results show that firms with foreign capital participation or those with good access to domestic bank loans innovate more than others do. We also find that inward FDI at the sectoral level is positively associated with domestic innovative activity only if firms engage in own R&D or if they have good access to domestic finance. However, access to finance only plays a role for private or collectively owned firms, less so for state-owned enterprises. Furthermore, we distinguish the effect of sector level inward FDI into technology transfer and FDI affecting domestic credit opportunities and find that the latter is of very little significance for SOEs and is also independent of their access to finance. By contrast, it is an important channel through which FDI affects the innovation of domestic private and collectively owned enterprises.
Girma, S. and H. Görg, “Multinationals productivity advantage: Scale or technology?”, Economic Inquiry, Vol. 45, No. 2, 2007, pp. 350–362
Abstract: The first aim of this paper is to decompose the productivity advantage of foreign multinationals into two components: the technology and scale effect. The second aim is to analyse the causal relationship between foreign ownership and these two components of productivity growth. We do so by analyzing the effects of an acquisition of a domestic establishment by a foreign multinational enterprise, using a combined propensity score matching and difference-in-differences estimation. Our empirical analysis is based on plant level data for the UK. From our econometric investigation four broad patterns emerge: (i) any positive impact of ownership change is predominantly due to change in technical efficiency, not scale effects (ii) the pre-acquisition TFP level of the erstwhile domestic plants play a role – positive or negative – in mediating the rate of technology transfer from the MNE parent companies, (iii) the productivity growth effects are not confined to the year of acquisition, and tend to persist through time.
Barrios, S., H. Görg and E. Strobl, “Foreign direct investment, competition and industrial development in the host country”, European Economic Review, Vol. 49, No. 7, 2005, pp. 1761–1784
Abstract: This paper analyses the impact of foreign direct investment (FDI) on the development of local firms. We focus on two likely effects of FDI: a competition effect which deters entry of domestic firms and positive market externalities which foster the development of local industry. Using a simple theoretical model to illustrate how these forces work we show that the number of domestic firms follows a u-shaped curve, where the competition effect first dominates but is gradually outweighed by positive externalities. Evidence for Ireland tends to support this result. Specifically, applying semi-parametric regression techniques on plant level panel data for the manufacturing sector we find that while the competition effect may have initially deterred local firms’ entry, this initial effect has been outpaced by positive externalities making the overall impact of FDI largely positive for the domestic industry.
Hijzen, A., H. Görg and R. C. Hine, “International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom”, The Economic Journal, Vol. 115, No. 506, 2005, pp. 860–878
Abstract: This paper investigates empirically the link between international outsourcing and the skill structure of labour demand in the United Kingdom. It is the first detailed study of this issue for the UK. Outsourcing is calculated using import-use matrices of input-output tables for manufacturing industries for the period 1982 to 1996. Estimating a system of variable factor demands, our main results show that international outsourcing has had a strong negative impact on the demand for unskilled labour. Hence, international outsourcing is an important component in explanations of the changing skill structure of manufacturing industries in the United Kingdom.
Görg, H. and D. Greenaway, “Much Ado about Nothing?: Do Domestic Firms Really Benefit from Foreign Direct Investment?”, World Bank Research Observer, Vol. 19, No. 2, 2004, pp. 171–197
Abstract: Governments the world over offer significant inducements to attract investment, motivated by the expectation of spillover benefits to augment the primary benefits of a boost to national income from new investment. There are several possible sources of induced spillovers from foreign direct investment. This article evaluates the empirical evidence on productivity, wage, and export spillovers in developing, developed, and transition economies. Although theory can identify a range of possible spillover channels, robust empirical support for positive spillovers is at best mixed. The article explores the reasons and concludes with a review of policy aspects.
Girma, S., Y. Gong, H. Görg and S. Lancheros, “Estimating Direct and Indirect Effects of Foreign Direct Investment on Firm Productivity in the Presence of Interactions between Firms”, Journal of International Economics, 2014, pp. forthcoming
Abstract: We implement a method to estimate the direct effects of foreign-ownership on foreign firms' productivity and the indirect effects (or spillovers) from the presence of foreign-owned firms on other foreign and domestic firms' productivity in a unifying framework, taking interactions between firms into account. To do so, we relax a fundamental assumption made in empirical studies examining a direct causal effect of foreign ownership on firm productivity, namely that of no interactions between firms. Based on our approach, we are able to combine direct and indirect effects of foreign ownership and calculate the total effect of foreign firms on local productivity. Our results show that all these effects vary with the level of foreign presence within a cluster, an important finding for the academic literature and policy debate on the benefits of attracting foreign owned firms.
Godart, O., and H. Görg. "The role of global value chains for German manufacturing." In Trade Policy Research 2011 – Global Value Chains, edited by Aaron Sydor, 335–366. Department of Foreign Affairs and International Trade Canada, 2011.
Abstract: This paper examines the role of global value chains by German manufacturing. Global value chains have clearly expanded in recent years. Still the bulk of outsourcing concerns materials outsourcing but services outsourcing is growing and catching up at a fast. There is strong evidence that not all German firms participate in global value chains. But, participants are among those that are more efficient in Germany Close by Central Eastern European countries and new European Union member states have been attractive locations for German firms, not only for low wage manufacturing activities. However, the value generated in these countries and flowing to German firms is still small, albeit growing rapidly compared to other European Union members. Furthermore, these countries seem often to be chosen in an overall global value chain strategy including jointly other more distant locations. Among the distant trading partners, China has not only become a source of many inputs but also an important customer of German exports of products and services which accounts in 2009 for about 5 percent of total German export. The academic reasoning follows traditional comparative advantages and patterns of specialization. China demands goods like capital-intensive and research-intensive machinery and equipment in which German has a comparative advantage. There is also evidence that workers in Germany are affected by outsourcing decisions by German firms. However, empirical research does not support net employment destruction following relocation decisions of firms. Instead, German firms adjust and specialize into more skill intensive activities which demand relatively more skilled workers. Another related finding is that some wage decrease is observed among workers employed in activities prone to be outsourced. It appears however that the economic magnitude of it is economically small and far apart from the popular myth of disruptive consequences of global value chains for employment and wages. More recent empirical research shows economic benefits for German firms from their involvements in global value chains. Reductions in total factor costs induced by increased outsourcing of goods and services permit firms to achieve gains in production efficiency and competitiveness.
Görg, H., R. Bandick and P. Karpaty, “Foreign Acquisitions, Domestic Multinationals, and R&D”, Scandinavian Journal of Economics, Vol. 116, No. 4, 2014, pp. 1091–1115
Abstract: Our aim in this paper is to evaluate the causal effect of foreign acquisition on research and development (R&D) intensity in targeted domestic firms. We are able to distinguish domestic multinational enterprises (MNEs) and non-MNEs, which allows us to investigate the fear that the change in ownership of domestic MNEs to foreign MNEs leads to a reduction in R&D activity in the country. Overall, our results give no support to the fears that foreign acquisition of domestic firms leads to a relocation of R&D activity in Swedish MNEs. Rather, in this paper, we find robust evidence that foreign acquisitions lead to increasing R&D intensity in acquired domestic MNEs and non-MNEs.
De Rosa, D., N. Gooroochurn and H. Görg, “Corruption and Productivity: Firm-level Evidence”, Nationalökonomie und Statistik / Journal of Economics and Statistics, forthcoming
Abstract: Using enterprise data for the economies of Central and Eastern Europe and the Commonwealth of Independent States, this study examines the effects of corruption on productivity. Corruption is defined as a “bribe tax” and is compared with another form of institutional inefficiency, which is often believed to be closely linked with corruption: the “time tax” imposed on firms by red tape. When testing their effects in the full sample, only the bribe tax appears to have a negative effect on firm-level productivity, while the effect of the time tax is insignificant. At the same time, there is no evidence of a trade-off between the time and the bribe taxes, implying that bribing does not emerge as a second-best option to achieve higher productivity by helping circumvent cumbersome bureaucratic requirements. When the sample is split between European Union and non-European Union countries, the time tax turns out to have a negative effect only in European Union countries and the bribe tax only in non-European Union countries. This suggests that the institutional environment influences the way in which firm behavior affects firm performance. In particular, the impact of bribing for individual firms appears to vary depending on overall institutional quality: in countries where corruption is more prevalent and the legal framework is weaker, bribery is more harmful for firm-level productivity.
Görg, H., R. Kneller and B. Muraközy, “What makes a successful export?”, Canadian Journal of Economics, Vol. 45, No. 4, 2012, pp. 1332–1368
Abstract: We analyse a very rich and unique panel database which provides information on exports at the firm-product level. A stylised fact in the data is that many firms add as well as drop products from the export mix in any given year. Motivated by recent theory we investigate what determines the survival of products in the export mix. Estimating hazard models we find evidence that is consistent with the view that characteristics of the product as well as that of the firm matter. This suggests, in line with theory, that there are firm- as well as firm-product specific competencies that are important for shaping firms’ export mix.
Recent Working Papers
Kersting, E. and H. Görg, “Vertical Integration and Supplier Finance”, Kiel Working Paper , no. 1894, 2014, 30 pp. pages
Abstract: We investigate the financial implications of a multinational firm’s choice between outsourcing and integration from the perspective of the supplier. Using a simple model, we explore the extent to which an integrated supplier’s access to finance, as well as its sources of funding, change relative to a firm supplying a multinational at arm’s-length. The model predicts that integrated firms have better access to finance and cover a larger share of their costs using internal funds. Furthermore, improvements in a host country’s level of financial development have less of an impact on the financial situation of integrated suppliers. We present empirical evidence from firm-level data for over 60 countries broadly supporting the predictions.
Fritsch, U. and H. Görg, “Outsourcing, Offshoring and Innovation: Evidence from Firm-level Data for Emerging Economies”, Kiel Working Paper, No. 1861, 2013, pp. 31
Abstract: It is striking that by far the lion’s share of empirical studies on the impact of outsourcing on firms considers industrialized countries. However, outsourcing by firms from emerging economies is far from negligible and growing. This paper investigates the link between outsourcing and innovation empirically using firm-level data for over 20 emerging market economies. We find robust evidence that outsourcing is associated with a greater probability to spend on research and development and to introduce new products and upgrade existing products. The effect of offshoring on R&D spending is significantly higher than the effect of domestic outsourcing. However, only domestic outsourcing increases the probability to introduce new products. We also show that the results crucially depend on the level of protection of intellectual property in the economy. Firms increase their own R&D effort in the wake of outsourcing only if they operate in an environment that intensively protects intellectual property.
Görg, H. and M. Spaliara, “Export market exit, financial pressure and the crisis”, Kiel Working Paper No. 1859, 2013, pp. 31
Abstract: Using firm-level data for the UK, we investigate the link between firms’ financial health, borrowing ratio and export exit, paying special attention to the recent financial crisis. Our results show that deterioration in the financial position of firms has increased the hazard of export exit during the crisis. We also find that the sensitivity of export exit to changes in firms’ financial condition is higher during the crisis for those firms which face increases in loan spreads associated with the firm-specific interest rate.
Görg, H. and A. Seric, “With a little help from my friends: Supplying to multinationals, buying from multinationals, and domestic firm performance”, Kiel Working Paper, No. 1867, 2013, pp. 24
Abstract: This paper uses firm level data for 19 African countries to look at the link between domestic firms’ business relationship with multinationals and their performance in terms of innovation and productivity. Quite uniquely, we also evaluate the importance of support received by the domestic firm, either from the government or the multinational business partner, for this link. Overall, our data analysis shows that for the average domestic firm, supplying to a foreign multinational in the country (the backward linkage) is positively associated with product innovation. Buying from a multinational (the forward linkage) is positively associated with labor productivity. These results are independent of any type of support from the government or multinationals. We also find that domestic firms’ process innovation activity is only positively associated with supplying a multinational if the firm also receives assistance from the government or multinational. Furthermore, we find that supplying a multinational is only positively associated with domestic firms’ productivity if the firm received technology transfer from the multinational customers.
Girma, S., Y. Gong, H. Görg and S. Lancheros, “Foreign ownership structure, technology upgrading and exports: Evidence from Chinese firms”, Kiel Working Paper, No. 1793, 2012, pp. 39
Abstract: We examine the role of foreign ownership structure in stimulating technology and skill upgrading, and exporting in Chinese manufacturing firms that were taken over by foreign owners. The analysis considers the period 2001 to 2007. We use a propensity score reweighted least squares estimation to control for the possible endogeneity of the acquisition decision. Our results indicate that there are strong effects on export activity post-acquisition for all types of ownership share. We also find that targets that are taken over with a less than 100 per cent foreign ownership share experience increases in new product development and R&D upgrading due to the acquisition. Overall, our results suggest that joint ventures between foreign owners and Chinese firms can contribute positively to China’s “science and technology take-off”.
Görg, H., L. Halpern and B. Muraközy, “Why do within firm-product export prices differ across markets?”, Kiel Working Paper No. 1596, 2010
Abstract: In this paper we analyze the relationship between gravity variables and f.o.b. export unit values using Hungarian firm-product-destination data. By taking firm-product level selection into account we show that export unit values increase with distance even for particular firm-product level selection and constant markups. The differences are important quantitatively; price differences in Hungarian exports between Germany and the US are about 30%. We also show that unit values are positively related to GDP/capita and that there is a weak negative relationship between unit values and market size. We propose two possible explanations: first, firms may export different quality versions of the same product to different markets. Secondly, directly exporting firms may capture part of the markups on transport cots in their f.o.b. prices.
Godart, O., H. Görg and A. Hanley, “Trust-based Work-time and Product Improvements: Evidence from Firm Level Data”, Kiel Working Paper, No. 1913, 2014, pp. 1–31
Abstract: We explore whether the introduction of trust based working hours is related to the subsequent innovation performance of firms. Employing a panel data set of over 5,000 German establishments, we implement a propensity score matching approach where we only consider firms that did not use trust based work contracts initially. Our results show that firms which adopt such contracts tend to be between 11 to 14 percent more likely to improve products. These results hold when we control for another form of flexible time work arrangements, namely working time accounts. Thus, the positive relationship between the adoption of trust based working hours and innovation seems to be driven by the degree of control and self-management over working days, rather than by merely allowing time flexibility