Essays on the internationalisation of firms

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School of Business | Doctoral thesis (article-based) | Defence date: 2011-03-11
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12, [133] s.
Aalto University publication series. DOCTORAL DISSERTATIONS, 12/2011
This dissertation studies the internationalisation of firms and the consequences of this phenomenon for the employees of firms involved in international activities and for purely domestic firms. These analyses make use of Finnish linked employer-employee panel data. The dissertation consists of four essays. The first two essays in the dissertation analyse spillovers from multinational to domestic firms. The first essay studies whether employees are able to appropriate returns to knowledge accumulated in foreign-owned firms when moving to domestic firms. The estimates indicate that highly educated employees earn a return to prior experience in a foreign owned firm, over and above the return to other previous experience. These workers do not appear to pay for the accumulation of knowledge in the form of lower wages. The second essay compares the productivity and wage effects of labour flows between multinational and domestic firms. The results indicate that hiring workers from foreign multinationals is related to both higher productivity and higher wages in local domestic firms. There is no net effect on profitability growth. More detailed analysis of the labour flows indicates that these effects are driven by hiring of relatively young workers who appear able to internalise the returns to productivity enhancing knowledge when moving from foreign MNEs to domestic firms. The third essay of the dissertation analyses employee flows in firms subject to foreign acquisitions. The results show that in the industrial sector, the job separation hazard increases in the year following a foreign or domestic acquisition. Neither foreign nor domestic M&A transactions appear to influence the job separation hazard of service sector employees in the first year following the acquisition, but in the second and third years after the transaction the job separation hazard increases with a larger change following foreign than domestic acquisitions. The fourth essay of the dissertation develops a theoretical model that enables the analysis of the effect of international trade on both intra- and intersectoral wage distributions as well as unemployment. The major results we reach are as follows: a) factor price equalisation does not hold in the H-O-version of the model; b) aggregate changes like a change in the aggregate firm/job destruction rate can have implications for the sectoral allocation of factors of; c) the theory is consistent with the observations that exporting firms tend to be larger firms; d) the firm heterogeneity is endogenous.
Supervising professor
Ilmakunnas, Pekka, professor
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