Outward FDI, performance and group affiliation: evidence from French matched firms

This paper investigates whether group affiliation and stakeholder's nationality affect both the propensity of engaging in outward FDI and its effects on home performance. Using a sample of French manufacturers, we combine propensity-score matching with a Difference-In-Difference estimator in order to estimate the impact of outward FDI on home activities, and distinguish our results for three subsamples: independent firms, firms which belong to a French business group and foreign-owned affiliates. We find that firms which are part of a French business group are more likely to engage in outward FDI and to enjoy positive effects from their investment decision than independent firms. This suggests that independent firms face more obstacles in their internationalization process and that group affiliation might increase the ability of handling international development. Reversely, foreign-owned firms appear less likely to engage in outward FDI and do not enjoy any significant effect on their home performance ex-post. One explanation for this result might be that foreign-owned firms do not invest abroad in order to increase their own performance, but the performance of their own group.