An investigation of foreign affiliates and supply chain productivity in the European Union industrial sectors

Abstract

This study examines the relationship between foreign affiliates and labour productivity in the supply chains of construction and manufacturing sectors. Labour productivity is calculated using EUKLEMS & INTANProd database of the Luiss Lab of European Economics, while foreign affiliates abroad data are taken from Eurostat. Based on 19 EU countries from 2010 to 2019, we demonstrate how turnover per employee in foreign subsidiaries controlled by the reporting country positively and significantly impacts labour productivity in the construction sector supply chains. Foreign direct investment from these European countries also positively and significantly impacts labour productivity in sectors’ supply chains. Public decision-makers can use this study to highlight elusive fiscal strategies and outline the actual share of domestic and foreign productivity for industrial economic sector supply chains by considering the impact of permanent establishments.