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Absorptive Capacity and Productivity Spillovers from FDI: A Threshold Regression Analysis

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Sourafel Girma

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Abstract

This paper explores whether the effect of foreign direct investment (FDI) on productivity growth is dependent on absorptive capacity using recently developed threshold regression techniques. In manufacturing sectors where technology-exploiting multinationals are prevalent, the results point to the presence of nonlinear threshold effects: the productivity benefit from FDI increases with absorptive capacity until some threshold level beyond which it becomes less pronounced. But there is also a minimum absorptive capacity threshold level below which productivity spillovers from FDI are negligible or even negative. On the contrary, no evidence of productivity spillovers is found in sectors where FDI appears to be motivated by technology-sourcing considerations. Copyright 2005 Blackwell Publishing Ltd.

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Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 67 (2005)
Issue (Month): 3 (06)
Pages: 281-306
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Handle: RePEc:bla:obuest:v:67:y:2005:i:3:p:281-306

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Singh, Lakhwinder, 2006. "Innovations, High-Tech Trade and Industrial Development: Theory, Evidence and Policy," Working Papers RP2006/27, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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  3. Leahy, Dermot & Neary, J Peter, 2004. "Absorptive Capacity, R&D Spillovers and Public Policy," CEPR Discussion Papers 4171, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Girma, Sourafel & Gong, Yundan & Görg, Holger, 2006. "Can You Teach Old Dragons New Tricks? FDI and Innovation Activity in Chinese State-Owned Enterprises," CEPR Discussion Papers 5838, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Nuno Crespo & Isabel Proença & Maria Paula Fontoura, 2008. "FDI Spillovers at Regional Level: Evidence from Portugal," Working Papers ercwp0508, ISCTE, UNIDE, Economics Research Centre. [Downloadable!]
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  6. Subash Sasidharan, 2006. "Foreign Direct Investment and Technology Spillovers:Evidence from the Indian Manufacturing Sector," Working Papers id:448, esocialsciences.com. [Downloadable!]
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  7. Marin, Anabel & Sasidharan, Subash, 2008. "The Heterogeneity of MNC' Subsidiaries and Technology Spillovers: Explaining positive and negative effects in emerging economies," UNU-MERIT Working Paper Series 066, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
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  15. Yuko Kinoshita & Chia-Hui Lu, 2006. "On the Role of Absorptive Capacity: FDI Matters to Growth," William Davidson Institute Working Papers Series wp845, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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