chapter  12
17 Pages

Do foreign ownership and technological environment affect rm survival? Evidence on Italian manufacturing and services rms

ByFILIPPO REGANATI, ANNA M. FERRAGINA, ROSANNA PITTIGLIO

Recently, by investigating the survival of foreign subsidiaries in Denmark over the period 1895-2001, Kronborg and Thomsen (2009) have shown that FMNEs have a higher survival probability than domestic enterprises; however, the foreign survival advantage appears to have been eroded by globalisation. But within the literature, one issue that has been somewhat overlooked is that of which factors may moderate or strengthen the footloose behaviour of FMNEs. In particular, it could be argued that, given the strong concentration of FMNEs in industries with higher R&D intensity and greater technological complexity, the technological intensity of an industry might moderate their footloose behaviour.2 This question is particularly crucial if we consider that within the existing literature the relationship between the level of technological intensity in a sector and the survival probability of rms active in that sector is not clear-cut (Audretsch, 1995). On the one hand, being active in a highly innovative sector enables rms to create new products, stimulating growth and thereby their likelihood of survival. There is compelling evidence that product and process innovation are important for survival, because even incumbent rms must continuously innovate in order to mitigate the threat of disruption by new technologies (Christensen, 1997). On the other hand, it has been argued that the risk of exit may be higher for rms in high-tech sectors because of the uncertainty associated with innovation (Ericson and Pakes, 1995).