Description
Firms are facing different challenges within the same country, particularly when comparing domestic and foreign owned firms. We empirically test for these differences coming from formal and informal institutions. This is a new angle on the “Liability of Foreignness” (LOF) debate. Existing research overwhelmingly use LOF as assumption to investigate differences in performance or strategy rather than testing its existence directly. Focusing on the latter, we aim to gather empirical evidences about the characteristics of the LOF by testing a broad set of institutional indicators (administration, licensing, political institutions, corruption and tax rate), and direct and indirect business costs (eg. time delays in trading across borders) using firm level survey data. We find institutions to be perceived as significantly less hurtful by foreign firms for both, latent firm level indicator of institutions (first principal component of all firm level institutional outcomes) and most of the individual indicators. In terms of direct business cost, we find less costs for trading across borders (eg., importing goods) for foreign firms. All remaining indictors are insignificant but still tend to indicate less hazards for foreign firms, while only few (public goods, operating license) seem to favor local firms (and again not significantly). The results are robust for using various cut off points for the amount of foreign ownership dummies, using continuous foreign ownership, non-linear effects, and to sample selection, and endogeneity using matching and difference in difference, instrumental variable estimation, fixed effect panel regression on a smaller subset of the data, country-by-country regression and using country-year sector as well as country year region fixed effects.| Period | 21 May 2018 → 25 Jun 2018 |
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| Event title | 17th session of the Institutional and Organizational Economics Academy From the 21–25 of May 2018 in Corsica (France). |
| Event type | Unknown |
| Degree of Recognition | International |