Essays on Foreign Ownership, Multinational Business Groups and Wages

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Kornitzky, Stefan:
Essays on Foreign Ownership, Multinational Business Groups and Wages.
Bayreuth , 2023 . - XIV, 86 S.
( Dissertation, 2023 , Universität Bayreuth, Rechts- und Wirtschaftswissenschaftliche Fakultät)
DOI: https://doi.org/10.15495/EPub_UBT_00007302

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Abstract

This thesis aims to advance the literature on the effects of foreign firm ownership and the organization structure of multinational business groups by shedding light on three distinct research questions:

(i) How does the acquisition of German plants by foreign owners affect workers' wages?

(ii) How does foreign ownership influence the task composition in German plants?

(iii) How does the position in business group hierarchies affect workers' wages?

To answer these research questions, this thesis presents new empirical and theoretical evidence in three separate chapters.

After a short introduction in Chapter 1, Chapter 2 evaluates the effect of foreign takeover on wages of workers in German establishments using rich linked employer-employee data from 2003 to 2014. To identify a causal effect of foreign takeover, propensity-score matching is combined with a difference-in-difference estimator. The results show that a takeover by a foreign investor leads to a wage premium of 4.0 log points in the year after ownership change, which further increases to 6.3 log points three years after acquisition. The wage premium is largest for high-skilled workers, which is consistent with three theoretical arguments, namely rent appropriation by managers, technology protection, and training on new technology. The analysis also shows that the wage premium does not pick up an exporter effect due to a platform investment of the foreign owner, that the wage premium takes about four years before it fully develops, that the wage premium does not vanish after foreign divestment, and that the wage increase is specific to foreign acquisition instead of ownership change per se.

Chapter 3 investigates the effect of foreign takeover on the task composition in German plants in the period from 2000 to 2019. The empirical analysis presents descriptive evidence that foreign-owned establishments in Germany are more intensive in routine tasks. Combining propensity-score matching with a difference-in-difference estimator, this chapter shows that foreign takeover leads to a reduction in the non-routine analytical task share of 0.2 percentage points. This is consistent with the theoretical argument that in multinational firms non-routine tasks are less easily performed abroad. The analysis also demonstrates that this effect cannot be attributed to foreign owners changing the hierarchical organization of plants by adding or dropping layers.


In Chapter 4 firm-level data on ownership linkages are merged with administrative data on German workers to analyze how the position in a business group hierarchy affects workers' wages. To acknowledge that ownership linkages are not one-directional, an index, which measures hierarchical distance to the ultimate owner and accounts for the complex network structure of business groups is proposed. After controlling for unobserved heterogeneity, the analysis documents a positive effect of larger hierarchical distance to the ultimate owner of a business group on workers' wages. To explain this finding, a monitoring-based theory of business groups is presented. This model predicts higher wages to prevent shirking by workers if a larger hierarchical distance to the ultimate owner is associated with lower monitoring efficiency.

Abstract in weiterer Sprache

Diese Dissertation beschäftigt sich mit drei Fragestellungen zur Auswirkung multinationaler Unternehmen:

(i) Wie wirkt sich eine ausländische Übernahme auf die Löhne der betroffenen Mitarbeiter aus?

(ii) Wie beeinflusst eine ausländische Übernahme die Arbeitsinhalte der Belegschaft?

(iii) Welchen Einfluss hat die hierarchische Position in multinationalen Firmengruppen auf den Lohn der Mitarbeiter?