The productivity effect

The data used in this paper are the subscribed data and we do not have permission to share the dataset. In this paper, we find that the effect of foreign subsidiary productivity on multinational performance is highest when parent and subsidiary firms are in the digital sector. The effect is significantly weakened when the parent company is in the digital sector but the subsidiary is not, and vice-versa. This suggests that the relatedness between the parent and subsidiary firms in terms of their digital sector affiliations is important for the productivity effect. In addition, the productivity effect is more pronounced even during times of uncertainty, such as the recent global pandemic, suggesting a greater connectedness due to globalisation. We show that multinational parents are able to mitigate the adverse effect of high wage cost through the performance of subsidiaries.
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