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Competition, Monopoly and Corporate Governance

Essays in Honour of Keith Cowling

Edited by Michael Waterson

Competition, Monopoly and Corporate Governance covers three broad themes, each associated with a particular strand of Keith Cowling’s own writings in industrial economics and each represented by four specially commissioned papers.
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Chapter 2: Multinationals and Labour: Evidence from the International Acquisition of UK Firms

Martin J. Conyon, Sourafel Girma, Steve Thompson and Peter W. Wright


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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