Impact of foreign ownership on innovation

Abstract

On the basis of longitudinal data for a sample of 1267 Spanish industrial firms over a period of 5 years, this paper analyses the impact of foreign ownership concentration on the firm's innovation performance. To that end, the study investigates how the level of ownership affects the firm's new product development. The results reflect no significant differences between the innovation of foreign-owned firms and that of domestically owned firms. However, the results reveal that up to a certain level of foreign ownership, the lower possibility of appropriation of rents has a negative effect on innovation, while above that level of foreign ownership, the possibility of appropriating those rents increases the firm's innovation performance. European Management Review (2008) 5, 253-263. doi:10.1057/emr.2008.22