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Does Foreign Presence Induce Host Country Firms’ Exit? The Case of Portugal

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Abstract

This paper analyzes the impact of foreign presence on the probability of exit of host country firms, based on a significant sample of Portuguese companies from manufacturing and services over the period 2008–2012. The estimation results of a probit model strongly indicate that foreign presence at the industry level increases a host country firm’s probability of exit from manufacturing sectors. We also conclude that firms with foreign ownership have a lower probability of exit than purely domestic firms. Additionally, empirical findings also confirm that a firm’s probability of exit is influenced by the firm’s characteristics such as age, productivity and debt structure.

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Notes

  1. For further details on these determinants see, for instance, Taymaz and Özler (2007).

  2. Subscripts i, j and t refer respectively to the firm, sector and time (year).

  3. Instituto Nacional de Estatistica (2010) reported that in 2008 there were 350,801 active firms.

  4. For each of the three samples (all firms, manufacturing and services) we also ran two alternative specifications of the model considering turnover and the assets as a proxy for firm size (Online Supplemental Appendix Tables 3 and 4, respectively). The results are quite similar to those obtained with the number of employees.

  5. The results of the Wald test also confirmed the joint significance of the explanatory variables.

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Funding

This research has been financed by Portuguese Public Funds through FCT (Fundação para a Ciência e a Tecnologia) in the framework of the project UID/ECO/04105/2013.

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  1. CEF.UP and Faculty of Economics, University of Porto, Rua Dr. Roberto Frias, 4200-464, Porto, Portugal

    Paula Sarmento & Rosa Forte

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  1. Paula Sarmento
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  2. Rosa Forte
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Correspondence to Paula Sarmento.

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Sarmento, P., Forte, R. Does Foreign Presence Induce Host Country Firms’ Exit? The Case of Portugal. Int Adv Econ Res 25, 323–337 (2019). https://doi.org/10.1007/s11294-019-09744-5

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