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Which Boats are lifted by a Foreign Tide? Direct and Indirect Wage Effects of Foreign Ownership

Girma, Sourafel; Görg, Holger; Kersting, Erasmus

Authors

SOURAFEL GIRMA sourafel.girma@nottingham.ac.uk
Professor of Industrial Economics

Holger Görg

Erasmus Kersting erasmus.kersting@villanova.edu



Abstract

The attraction of foreign direct investment (FDI) is considered to be of particular importance for emerging economies because it represents a channel through which international convergence in standards of living may be achieved. One important effect of FDI is its impact on wages, both within the targeted firm (direct) and the local firms within the same geographic region and sector (indirect). In this paper we investigate the question whether multinational enterprises (MNEs) raise or lower wages directly and indirectly, both theoretically and empirically. Importantly, the magnitude of these changes may depend on how many firms in the sector are already foreign-owned. Generally, the effect of MNEs on wages has not been studied as intensively in the international business (IB) literature as other aspects of FDI, and ours is the first article to specifically investigate the moderating effect of variation in foreign employment shares across industry-province cells (clusters). Using Chinese data on 146,199 firms we estimate the direct wage effect of foreign ownership to be positive and to increase with the employment share of foreign *

Journal Article Type Article
Publication Date Aug 1, 2019
Journal Journal of International Business Studies
Print ISSN 0047-2506
Electronic ISSN 1478-6990
Publisher Palgrave Macmillan
Peer Reviewed Peer Reviewed
Volume 50
Issue 6
Pages 923-947
APA6 Citation Girma, S., Görg, H., & Kersting, E. (2019). Which Boats are lifted by a Foreign Tide? Direct and Indirect Wage Effects of Foreign Ownership. Journal of International Business Studies, 50(6), 923-947. https://doi.org/10.1057/s41267-019-00248-2
DOI https://doi.org/10.1057/s41267-019-00248-2
Keywords Management of Technology and Innovation; Strategy and Management; Economics and Econometrics; General Business, Management and Accounting; Business and International Management
Publisher URL https://link.springer.com/article/10.1057/s41267-019-00248-2
Additional Information Received: 9 November 2018; Revised: 14 May 2019; Accepted: 19 May 2019; First Online: 8 July 2019

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