FDI from emerging markets and the productivity gap—An analysis on affiliates of BRICS EMNEs in Europe

This paper analyses differences in productivity of foreign affiliates of emerging market multinationals (EMNEs) from the BRICS against their counterparts from developed countries and domestic MNEs. Based on a large database on foreign affiliates in Europe, results find EMNEs at the bottom of the productivity ladder, with an average productivity gap of around 30 percentage points compared to more established competitors. The paper also shows that this effect is not homogeneously distributed since it varies in terms of sectorial distribution and technology intensity of activities performed, as well as by geographic destination. Moreover, firms’ heterogeneity plays a key role given that productivity differentials are largely accounted for the least productive firms, while those at the top of the distribution tend to reach similar performances than their more established competitors, especially in services. 2014 Elsevier Ltd. All rights reserved. * Tel.: +32 32655936. E-mail address: [email protected] 1 Bloom et al. (2012) attribute the US advantage to superior capacity in ‘‘IT intensive’’ industries and better management. Criscuolo and Martin (2009), in contrast, argue that US leadership reflects a tendency of US MNEs to ‘‘cherry pick’’ the best plants in host countries.