hourly real wages per employee to control for differences between foreign and domestic in the hours worked<sup>11</sup> . The consumer price index comes from National Department of Statistics. The level of aggregation used for region and sector composition was Nuts1-region<sup>12</sup> and three digits sector classi fi cation<sup>13</sup> .

The selection of fi rms that were acquired by foreigners is done according to the following criteria. First, I identi fi ed all the fi rms that have operated for two consecutive years with 100 percent domestic capital and that for the next three years have at least 10 percent of foreign capital. Therefore, while these fi rms are newly foreign, they existed before under domestic ownership. Second, I restrict the analysis to fi rms that operated for at least fi ve consecutive years. If the analysis is to be based on the change in ownership, it is important to have information on the fi rm two years before the acquisition in order to analyze the fi rm’s choices before the ownership change, while the use of the following two years ensure that the fi rm does not exit immediately after. Even though the sample period for identifying foreign acquisitions is 1993-1996, it stretches to 1991-1998, due to these requirements. Third, the sample is restricted to fi rms with more than 30 employees in every surveyed year. Fourth, the fi rm must be located in continental Portugal and cannot operate in the primary sector in any surveyed year<sup>14</sup> . The selection of fi rms that remain always under domestic and foreign ownership was as similar as possible to the sample of acquisitions. First, they must operate for at least fi ve consecutive years. Second, during that period a domestic fi rm can never be foreign participated and foreign fi rms have always at least 10 percent of foreign ownership.

> 11Workers of foreign owned fi rms work on avearge less hours than workers in domestic fi rms. E.g., low educated workers in foreign fi rms work 171 hours per month (173 hours in domestic fi rms) and high educated workers work 166 hours (168 hours in domestic fi rms).

> 12Eurostat divides the european countries into Nuts (Nomenclature of Territorial Units for Statistics). These can vary between Nut 1 to Nut 3, according to the disagregation level. The Nut 1 classi fi cation divides Portugal into 5 regions: North, Center, Lisbon Area, Alentejo and Algarve.

> 13Because the national sector classi fi cation changed in 1994, I assumed that, between 1991 and 1995, there is no change in sector classi fi cation at three digit level by using the fi rm sector classi fi cation in 1995.

> 14The usual problem of the non-random exit of acquisitions from the sample (attrition) does not seem to be severe in this data. Mata and Portugal (2002) fi nd evidence that the survival rates for acquired fi rms are very high. After fi ve years of operation more than two thirds and more than four fi fths of the foreign green fi eld and acquisition entrants are still in operation. This is not the case for the UK, where Girma and Görg (2001) fi nd that foreign acquisitions reduce the probability of survival of the plant in the electronics industry.

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