The Impact of Acquiring “Control ” on Productivity: Evidence from Mexican Manufacturing Plants

This paper investigates the importance of corporate “control ” on the performance of foreign affiliates of multinational corporations (MNCs). Using detailed micro-level information from Mexico, I show that manufacturing plants where MNCs acquire majority ownership (“control”) become more productive. To explore whether this link is causal, I exploit the removal of foreign majority ownership restrictions and study the performance of plants where multinational ownership increased from minority to majority as a result. Acquiring control is associated with large improvements in total factor productivity, and that enhanced performance is concentrated in industries that rely on technological innovations from their parent companies. The evidence supports the “property rights ” theory of the firm