Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia

This paper uses micro data from the Indonesian Census of Manufacturing to analyze the causal relationship between foreign ownership and plant productivity. To control for the possible endogeneity of the FDI decision, the difference in differences approach is combined with a matching technique. An ad...

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Main Authors:	Arnold, Jens Matthias, Javorcik, Beata Smarzynska
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING AFFILIATES ASSETS BANK LOANS CAPACITY UTILIZATION COMMODITIES CONSTANT RETURNS TO SCALE CREDIT CONSTRAINTS DEFLATION DEFLATORS DEVELOPED COUNTRIES DEVELOPING COUNTRY CONTEXT DIRECT INVESTMENT INFLOWS DOMESTIC ENTERPRISES DOMESTIC FIRMS ECONOMIC POLICY ECONOMISTS EMERGING MARKETS EMPIRICAL EVIDENCE EMPLOYMENT EXPORTS FINANCIAL CRISIS FINANCIAL INSTITUTIONS FIXED ASSETS FOREIGN AFFILIATES FOREIGN CAPITAL FOREIGN DIRECT INVESTMENT FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OWNERSHIP FOREIGN-OWNED FIRMS GDP GLOBAL ECONOMY HOST COUNTRIES HOST COUNTRY IMPORTS INDUSTRIALIZATION INTANGIBLE ASSETS INTERNATIONAL TRADE INVENTORY LABOR PRODUCTIVITY MANUFACTURING SECTOR MANUFACTURING SECTORS MERGERS METALS OIL PATENTS PERFORMANCE ANALYSIS PRODUCT DIFFERENTIATION PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY GROWTH SECURITIES SUBSIDIARIES SUBSIDIARY TECHNICAL ASSISTANCE TECHNOLOGICAL SOPHISTICATION TECHNOLOGY TRANSFER TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRADE BARRIERS VALUATION VALUE ADDED WAGES WHOLESALE PRICE INDEX
Online Access:	http://documents.worldbank.org/curated/en/2005/05/5800547/gifted-kids-or-pushy-parents-foreign-acquisitions-plant-performance-indonesia http://hdl.handle.net/10986/8935

id	okr-10986-8935
recordtype	oai_dc
spelling	okr-10986-89352021-04-23T14:02:42Z Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia Arnold, Jens Matthias Javorcik, Beata Smarzynska ACCOUNTING AFFILIATES ASSETS BANK LOANS CAPACITY UTILIZATION COMMODITIES CONSTANT RETURNS TO SCALE CREDIT CONSTRAINTS DEFLATION DEFLATORS DEVELOPED COUNTRIES DEVELOPING COUNTRY CONTEXT DIRECT INVESTMENT INFLOWS DOMESTIC ENTERPRISES DOMESTIC FIRMS ECONOMIC POLICY ECONOMISTS EMERGING MARKETS EMPIRICAL EVIDENCE EMPLOYMENT EXPORTS FINANCIAL CRISIS FINANCIAL INSTITUTIONS FIXED ASSETS FOREIGN AFFILIATES FOREIGN CAPITAL FOREIGN DIRECT INVESTMENT FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OWNERSHIP FOREIGN-OWNED FIRMS GDP GLOBAL ECONOMY HOST COUNTRIES HOST COUNTRY IMPORTS INDUSTRIALIZATION INTANGIBLE ASSETS INTERNATIONAL TRADE INVENTORY LABOR PRODUCTIVITY MANUFACTURING SECTOR MANUFACTURING SECTORS MERGERS METALS OIL PATENTS PERFORMANCE ANALYSIS PRODUCT DIFFERENTIATION PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY GROWTH SECURITIES SUBSIDIARIES SUBSIDIARY TECHNICAL ASSISTANCE TECHNOLOGICAL SOPHISTICATION TECHNOLOGY TRANSFER TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRADE BARRIERS VALUATION VALUE ADDED WAGES WHOLESALE PRICE INDEX This paper uses micro data from the Indonesian Census of Manufacturing to analyze the causal relationship between foreign ownership and plant productivity. To control for the possible endogeneity of the FDI decision, the difference in differences approach is combined with a matching technique. An advantage of this novel method is the ability to follow the timing of the observed changes in productivity and other aspects of plant performance. The results suggest that foreign ownership leads to significant productivity improvements in the acquired plants. The improvements become visible in the acquisition year and continue in the subsequent periods. After three years, the acquired plants outperform the control group in terms of productivity by 34 percentage points. The data also suggest that the rise in productivity is a result of restructuring, as acquired plants increase their investment outlays, employment, and wages. Foreign ownership also appears to enhance the integration of plants into the global economy through increased exports and imports. 2012-06-25T15:40:14Z 2012-06-25T15:40:14Z 2005-05 http://documents.worldbank.org/curated/en/2005/05/5800547/gifted-kids-or-pushy-parents-foreign-acquisitions-plant-performance-indonesia http://hdl.handle.net/10986/8935 English en_US Policy Research Working Paper; No. 3597 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific Asia Indonesia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCOUNTING AFFILIATES ASSETS BANK LOANS CAPACITY UTILIZATION COMMODITIES CONSTANT RETURNS TO SCALE CREDIT CONSTRAINTS DEFLATION DEFLATORS DEVELOPED COUNTRIES DEVELOPING COUNTRY CONTEXT DIRECT INVESTMENT INFLOWS DOMESTIC ENTERPRISES DOMESTIC FIRMS ECONOMIC POLICY ECONOMISTS EMERGING MARKETS EMPIRICAL EVIDENCE EMPLOYMENT EXPORTS FINANCIAL CRISIS FINANCIAL INSTITUTIONS FIXED ASSETS FOREIGN AFFILIATES FOREIGN CAPITAL FOREIGN DIRECT INVESTMENT FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OWNERSHIP FOREIGN-OWNED FIRMS GDP GLOBAL ECONOMY HOST COUNTRIES HOST COUNTRY IMPORTS INDUSTRIALIZATION INTANGIBLE ASSETS INTERNATIONAL TRADE INVENTORY LABOR PRODUCTIVITY MANUFACTURING SECTOR MANUFACTURING SECTORS MERGERS METALS OIL PATENTS PERFORMANCE ANALYSIS PRODUCT DIFFERENTIATION PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY GROWTH SECURITIES SUBSIDIARIES SUBSIDIARY TECHNICAL ASSISTANCE TECHNOLOGICAL SOPHISTICATION TECHNOLOGY TRANSFER TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRADE BARRIERS VALUATION VALUE ADDED WAGES WHOLESALE PRICE INDEX
spellingShingle	ACCOUNTING AFFILIATES ASSETS BANK LOANS CAPACITY UTILIZATION COMMODITIES CONSTANT RETURNS TO SCALE CREDIT CONSTRAINTS DEFLATION DEFLATORS DEVELOPED COUNTRIES DEVELOPING COUNTRY CONTEXT DIRECT INVESTMENT INFLOWS DOMESTIC ENTERPRISES DOMESTIC FIRMS ECONOMIC POLICY ECONOMISTS EMERGING MARKETS EMPIRICAL EVIDENCE EMPLOYMENT EXPORTS FINANCIAL CRISIS FINANCIAL INSTITUTIONS FIXED ASSETS FOREIGN AFFILIATES FOREIGN CAPITAL FOREIGN DIRECT INVESTMENT FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OWNERSHIP FOREIGN-OWNED FIRMS GDP GLOBAL ECONOMY HOST COUNTRIES HOST COUNTRY IMPORTS INDUSTRIALIZATION INTANGIBLE ASSETS INTERNATIONAL TRADE INVENTORY LABOR PRODUCTIVITY MANUFACTURING SECTOR MANUFACTURING SECTORS MERGERS METALS OIL PATENTS PERFORMANCE ANALYSIS PRODUCT DIFFERENTIATION PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY GROWTH SECURITIES SUBSIDIARIES SUBSIDIARY TECHNICAL ASSISTANCE TECHNOLOGICAL SOPHISTICATION TECHNOLOGY TRANSFER TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRADE BARRIERS VALUATION VALUE ADDED WAGES WHOLESALE PRICE INDEX Arnold, Jens Matthias Javorcik, Beata Smarzynska Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia
geographic_facet	East Asia and Pacific Asia Indonesia
relation	Policy Research Working Paper; No. 3597
description	This paper uses micro data from the Indonesian Census of Manufacturing to analyze the causal relationship between foreign ownership and plant productivity. To control for the possible endogeneity of the FDI decision, the difference in differences approach is combined with a matching technique. An advantage of this novel method is the ability to follow the timing of the observed changes in productivity and other aspects of plant performance. The results suggest that foreign ownership leads to significant productivity improvements in the acquired plants. The improvements become visible in the acquisition year and continue in the subsequent periods. After three years, the acquired plants outperform the control group in terms of productivity by 34 percentage points. The data also suggest that the rise in productivity is a result of restructuring, as acquired plants increase their investment outlays, employment, and wages. Foreign ownership also appears to enhance the integration of plants into the global economy through increased exports and imports.
format	Publications & Research :: Policy Research Working Paper
author	Arnold, Jens Matthias Javorcik, Beata Smarzynska
author_facet	Arnold, Jens Matthias Javorcik, Beata Smarzynska
author_sort	Arnold, Jens Matthias
title	Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia
title_short	Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia
title_full	Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia
title_fullStr	Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia
title_full_unstemmed	Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia
title_sort	gifted kids or pushy parents? foreign acquisitions and plant performance in indonesia
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2005/05/5800547/gifted-kids-or-pushy-parents-foreign-acquisitions-plant-performance-indonesia http://hdl.handle.net/10986/8935
_version_	1764407390702141440

Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia

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