Home Firm Performance after Foreign Investments and Divestitures

Being international’ has nearly become an undisputed aim for fi rms in a globalized world. Several papers fi nd a positive relationship between foreign direct investment (FDI) and the home performance of fi rms. In this paper we address the “FDI – export” relationship to better understand this pattern. Furthermore, by presenting fi rst results on fi rm’s post-divestiture employment growth at home we are able to provide a more comprehensive view on fi rm performance after stepping in and out of foreign markets. We apply a propensity score matching technique in combination with a diff erencein-diff erence estimator to analyze the performance dynamics of French fi rms that invested abroad or carried out foreign divestitures during the period 2000-2007. FDI has on average a positive home fi rm eff ect in terms of export share, operating turnover and employment. Industry diff erences reveal that fi rms in high-tech industries experience a strong increase in their home performance, whereas fi rm performance in low-tech industries increases only moderately in post-investment periods. In contrast, the divestiture impact on the post-divestiture performance is rather negligible.. JEL Classifi cation: F21, F23, D21, L25