Essays in Honour of Keith Cowling
Edited by Michael Waterson
Chapter 2: Multinationals and Labour: Evidence from the International Acquisition of UK Firms
2. Multinationals and labour: evidence from the international acquisition of UK ﬁrms Martin J. Conyon, Sourafel Girma, Steve Thompson and Peter W. Wright 1. INTRODUCTION This chapter examines the eﬀects of multinational enterprise (MNE) on labour outcomes, using ﬁrm ownership change as an experiment to isolate its impact. Speciﬁcally, our primary contribution is to evaluate both the wage and productivity eﬀects of domestic and foreign acquisitions within a large panel of UK ﬁrms over the period 1989–94. Our intention is to explore an issue that has become something of a battleground for competing hypotheses. This is whether multinational ﬁrms raise or lower employee wages, and improve or impede ﬁrm performance levels, in the domestic economy. The general debate has been considered by Caves (1996), Cowling and Sugden (1987, 1998) inter alia. A second contribution that we make is in methodology. The longitudinal nature of our data, which allows us to track ﬁrms over time, including changes in their ownership, means that we can provide superior econometric tests of the wage and productivity eﬀects of MNEs. In particular, the panel data allows us to purge the analysis of many of the industry, technology and plant vintage eﬀects that typically plague comparative work on wages and productivity. In taking this approach, it seems entirely appropriate that we are using one of Keith Cowling’s enduring professional interests, namely merger activity,1 to explore another, namely the impact of international capital on labour.2 Indeed Cowling and Sugden (1987)...
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