Analysis: Multinational firms and productivity – does country of origin matter?

In this analysis, the National Board of Trade Sweden has examined what happens to the productivity of Swedish companies that are acquired by foreign firms. Do the effects differ depending on whether the new owners are from Europe, North America, or Asia?

Ebba Lundqvist what is the analysis about?

We explore the impact on the productivity of Swedish companies following a foreign direct investment. The analysis builds on a previous study from 2023, which found that productivity significantly improved in Swedish companies after becoming foreign owned. However, this study aims to determine whether those results are generally applicable or if they vary based on the investor's country of origin. Specifically, we ask whether the effects differ if the foreign owner is from, for instance, the Nordic countries, the United States, or China.

What are the key findings of the analysis?

The analysis shows that foreign investments often target Swedish companies that are already relatively productive and have a high proportion of highly educated employees. Productivity tends to increase in Swedish companies acquired by firms from Europe, North America, and Japan—regions with which Sweden has well-established bilateral relations. Furthermore, Europe and the Nordic region are geographically close, which facilitates trade and investment. However, no significant productivity increase was observed in Swedish companies acquired by firms from India or China.

Which factors influence productivity after a foreign acquisition?

Geographical proximity and established bilateral relations, as well as the foreign investor's motives, play a significant role in the outcome. Foreign acquisitions often lead to changes in Swedish companies, as foreign investors typically bring advanced technology, management expertise, and access to larger markets. These factors can directly enhance performance. In cases where productivity does not increase, the foreign investor’s motivation may have been focused on market access rather than efficiency improvements. It is also worth noting that some Swedish companies might not have survived without the new ownership. If the alternative would have been bankruptcy, these acquisitions remain crucial for the Swedish economy.

Why do you view foreign direct investments as strategically important?

Our analysis underscores the role foreign direct investments play in boosting productivity, a key driver of economic growth. This is a highly policy-relevant issue, as global direct investment has stagnated since the 2008 financial crisis, and Sweden has not been exempt from this trend. At the same time, Sweden, like most EU countries, has implemented investment screening mechanisms that could further constrain the growth of such investments.

The slow productivity growth in the EU has attracted greater attention in 2024, particularly through Mario Draghi’s report on European competitiveness, which emphasises the importance of analysing factors that could reverse this trend. Foreign direct investment has been identified as a central driver in this context. In a time when geopolitics is a key concern, it is essential to recognise the value of attracting foreign expertise, capital, and technology through investments in Swedish companies. A productive and competitive economy also strengthens economic security in both Sweden and the EU. Therefore, creating an environment that attracts and retains foreign direct investments should be a strategic priority.

What is the National Board of Trade Sweden?

The National Board of Trade is the Swedish government agency for international trade, the EU internal market and trade policy. Our mission is to facilitate free and open trade with transparent rules as well as free movement in the EU internal market. We provide the Swedish Government with independent analyses, reports and policy recommendations and take into account the views of businesses of all sizes in international trade policy-related matters.