Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2012
  • Other Unpublished Work

Selection, Reallocation, and Knowledge Spillover: Identifying the Sources of Productivity Gains from Multinational Activity

By: Laura Alfaro and Maggie X. Chen
  • Format:Print
  • | Language:English
ShareBar

Abstract

The impact of multinational activity on host-country productivity has been a major topic of economic research. A positive impact can be attributed to knowledge spillovers from foreign multinational to domestic firms or a less stressed, alternative explanation—firm selections—whereby competition from multinational firms leads to market reallocations and allows only the most productive domestic firms to survive. We develop a theoretical and structural empirical framework to quantify and decompose the productivity gains from multinational activity and show that even though knowledge spillovers and selections both predict positive gains, the two effects can be disentangled by exploring their distinct predictions on the productivity and the revenue distribution properties of domestic firms. Using a large cross-country panel dataset of manufacturing firms, we find productivity gains from multinational activity are driven by knowledge spillovers in developing nations but selections and market reallocations in developed countries. The analysis also suggests significant evidence of between-industry reallocations in capital and labor markets.

Keywords

Multinational Firms and Management; Performance Productivity; Supply and Industry; Knowledge; Manufacturing Industry

Citation

Alfaro, Laura, and Maggie X. Chen. "Selection, Reallocation, and Knowledge Spillover: Identifying the Sources of Productivity Gains from Multinational Activity." 2012.

About The Author

Laura Alfaro

General Management
→More Publications

More from the Authors

    • 2022
    • Faculty Research

    Distributional Consequences of Monetary Policy Across Races: Evidence from the U.S. Credit Register

    By: Laura Alfaro, Ester Faia and Camelia Minoiu
    • AEA Papers and Proceedings

    Undisclosed Debt Sustainability

    By: Laura Alfaro and Fabio Kanczuk
    • March 2022 (Revised June 2022)
    • Faculty Research

    El Salvador: Launching Bitcoin as Legal Tender

    By: Laura Alfaro, Carla Larangeira and Ruth Costas
More from the Authors
  • Distributional Consequences of Monetary Policy Across Races: Evidence from the U.S. Credit Register By: Laura Alfaro, Ester Faia and Camelia Minoiu
  • Undisclosed Debt Sustainability By: Laura Alfaro and Fabio Kanczuk
  • El Salvador: Launching Bitcoin as Legal Tender By: Laura Alfaro, Carla Larangeira and Ruth Costas
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College