Foreign Ownership and Corporate Performance: The Czech Republic at EU Entry

Does foreign ownership improve corporate performance or do foreign firms merely select more productive targets for takeover? Do workers benefit from foreign acquisitions? We answer these questions based on comparing the be- fore/after change in several performance indicators of Czech firms subject to foreign takeover after 1997, i.e., after the initial waves of privatization were completed, with the corresponding performance change of matched compa- nies that remain domestically owned until 2005. We find that the impact of foreign investors on domestic acquisitions is significantly positive only in non-exporting manufacturing industries, while it is small in both services and manufacturing industries competing on international markets.Productivity, foreign ownership, FDI