Functional Upgrading and Productivity Growth of Multinational Subsidiaries in European Transition Economies


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Functional Upgrading and Productivity Growth of Multinational Subsidiaries in European Transition Economies

Show simple item record Burger, Anže Jindra, Björn Kostevc, Črt Marek, Philipp Rojec, Matija 2015-11-30T11:16:46Z 2015-11-30T11:16:46Z 2015-11-30
dc.description.abstract With economic transformation and European integration Central and Eastern European countries (CEECs) have been inserted into European and global production networks. The literature on global value chains (GVCs) suggests that firms’ performance in terms of value creation and capture crucially depends upon their ability to ‘upgrade’. Apart from product and process upgrading this refers to ‘functional upgrading’ i.e. the changing portfolio and nature of business functions executed by firms within the GVC. In principal this should hold also for multinational affiliates. They participate in GVCs through vertically integrated and specialized forms of organization. Their ability to upgrade is closely linked with their position, mandate and power asymmetries within the multinational network. Recent case study evidence documents functional upgrading in multinational subsidiaries located in CEECs. Yet, their ability to increase value capture through these processes has been contested. This paper tests the relationship between functional upgrading and productivity growth of multinational subsidiaries. We exploit a unique firm level dataset that matches state-of-the-art survey-based business function indicators with times-series accounting data for a representative sample of multinational subsidiaries in selected CEECs. The estimation results indicate that functional upgrading has a positive effect on foreign subsidiaries’ average productivity growth. The effect is higher for subsidiaries with more recent entries of foreign investors. This finding is robust to different measures for functional upgrading. The positive effect of functional upgrading seems to be mainly confined to foreign subsidiaries in manufacturing industries. en_US
dc.format.extent 22 en_US
dc.language eng en_US
dc.publisher GRINCOH. Growth-Innovation-Competitiveness Forstering Cohesion in Central and Eastern Europe en_US
dc.relation.ispartofseries GRINCOH-Working Paper Series;
dc.title Functional Upgrading and Productivity Growth of Multinational Subsidiaries in European Transition Economies en_US
dc.type wp en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.corporation Growth-Innovation-Competitiveness Fostering Cohesion in Central and Eastern Europe en_US
dc.contributor.department Institut for International Økonomi og Virksomhedsledelse en_US
dc.contributor.departmentshort INT en_US
dc.contributor.departmentuk Department of International Economics and Management en_US
dc.contributor.departmentukshort INT en_US
dc.description.notes This project has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement no 290657. en_US Warsaw en_US
dc.publisher.year 2015 en_US

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