Multinationality, foreignness and institutional distance in the relation between R&D and productivity

This paper empirically examines to what extent being foreign and part of a multinational affects the endogenous relation between R&D and productivity. Our findings indicate that multinationals obtain in general higher R&D returns. Also, there is a negative foreignness effect in that domestic-owned multinationals outperform foreign subsidiaries. However, these effects are somehow moderated by the institutional distance between the home and host countries. These results, obtained for a panel of UK firms, are largely consistent with a set of hypotheses derived from the institutional and international business theories.

► This study examines to what extent being foreign and part of a multinational affects the relation between R&D and productivity. ► Multinationals obtain on average higher R&D returns. ► There is a negative foreignness effect in that domestic-owned multinationals outperform foreign subsidiaries. ► The multinationality and foreignness effects are moderated by the institutional distance between the home and host countries.