Foreign takeovers spur robot adoption and cut firm labor share

Analyzing a panel of 3,128 Spanish manufacturing firms from 1990 to 2017, Bank of Italy researcher Fabrizio Leone isolates the causal impact of foreign multinational takeovers using nearest-neighbor matching combined with a staggered event-study design.

Following an acquisition, affiliate firms experience a 6.5 percentage point drop in their labor share, representing a 15 percent fall relative to the sample average.

Simultaneously, their probability of adopting industrial robots increases by 11 percentage points, or 30 percent above the sample mean.

Robot adoption alone accounts for approximately one third of the overall post-acquisition labor share decline, reducing it by 2.2 percentage points.

While acquired firms expand employment by 11 percent, their gross value added grows by 21 percent, driving the reallocation of income away from labor.

The study reveals that foreign parent companies spur automation primarily by granting affiliates access to global distribution networks rather than lowering credit constraints or transferring technology.

To convert expanded international demand into actual sales, affiliates scale up production operations.

Post-acquisition, affiliates become 9 percentage points more likely to engage in 24/7 continuous manufacturing, a 60 percent increase compared to matched domestic firms.

This scale expansion requires capital-intensive industrial robots, demonstrating that globalization and automation interact as mutually reinforcing drivers of factor income shifts.