GEP 10/20: What Causes Plant Closure within Multi-Plant Firms?

Summary

This paper investigates why multi-plant ownership raises the probability of plant closure. We find this is due to the characteristics of plants relative to the firm.

Abstract

This paper investigates why plants belonging to multi-plant firms are more likely to exit. Using Japanese plant data linked to firm data we study the process of plant closure among domestic multi-plant firms as well as multi-plant multinationals. As elsewhere in the literature these organisational forms are found to raise the probability of plant exit despite the superior characteristics of the plants they own. We find that the domestic multi-plant ownership effect is attributable to these firms closing the weakest elements of the firm. We reject the idea of multinationals being ‘footloose’ but instead find a residual effect of multinational ownership which reduces the probability of plant death when we control for the process of closure within those firms.

Download the paper in PDF format

Authors

Tomohiko Inui, Richard Kneller, Toshiyuki Matsuura and Danny McGowan

View all GEP discussion papers | View all School of Economics featured discussion papers