Multinational status and firm exit in the Italian manufacturing and service sectors

The aim of this paper is to investigate the determinants of survival for Italian firms according to their ownership status. To this end, we analyze firm survival distinguishing the Italian firms in foreign multinationals (FMNEs), domestic multinationals (DMNEs) and domestic non-multinational firms (NMNEs). The empirical analysis, carried out over the period 2004–2008, is based on the Cox Proportional Hazard Model, in which we look for the impact of ownership dummies on firm survival controlling for several firm and industry specific covariates. Our main findings reveal that FMNEs are more likely to exit the market than national firms in manufacturing and services. In contrast, DMNEs have a higher chance of survival compared with the other firm categories in services. However, when we conduct a finer level of industry classification, we observe the presence of some heterogeneity in the patterns of firm survival. Moreover, we find that the presence of foreign firms has a positive impact on firms’ survival mainly in the service sectors.

► Manufacturing and service firms owned by foreign MNEs (FMNEs) are more likely to exit the market.
► Domestic multinational (DMNEs) has higher chances of survival in the less-knowledge intensive services.
► FMNEs are more at risk of exiting in static manufacturing industries than in more dynamic ones.
► FMNEs are more at risk of exiting in knowledge-intensive than in less-knowledge-intensive services.
► Spillover effects of FMNEs on firm survival only in less knowledge-intensive service sectors.