Foreign Ownership and Within-MNEs GVC Participation as Determinants of Innovation Activities A CIS-Based Firm-Level Analysis

Abstract

In this paper we study the relationship between foreign firm ownership and
innovation activities in a wide group of West European and Central and East
European countries. Based on a dataset including more than 100,000 firms
covered by the 2014 edition of the Community Innovation Survey, we examine
the role of home- and host country effects in firms’ decisions to introduce various
forms of innovation. In addition, we identify a group of foreign-owned firms
that specialize in exporting and interpret them as participants of hierarchic
global value chains organized by multinational enterprises. We show that while
foreign direct investment, especially from Germany, is positively associated with
innovation, the opposite effect is observed in the case of hierarchic global value
chains’ participants. The negative impact of within-multinationals global value
chains on innovation is more pronounced in the affiliates located in the Central
and East European countries.