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Are there demonstration-related spillovers from FDI?: Evidence from Switzerland

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  • Ben Hamida, Lamia
  • Gugler, Philippe
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    Abstract

    This paper examines whether there are signs of demonstration-related spillovers from foreign direct investment (FDI). It hypothesizes that the size and the extent of such benefits vary according to the level of the absorptive capacity of local firms. Using detailed firm data from Swiss manufacturing and services/construction, we find strong evidence for demonstration-related spillovers when (a) local firms are not far behind the technological frontier of the industry with a technological gap slightly greater than one, and (b) local firms demonstrate high investment in the absorptive capacity. The results are found to be more consistent in manufacturing than services/construction.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 18 (2009)
    Issue (Month): 5 (October)
    Pages: 494-508

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    Handle: RePEc:eee:iburev:v:18:y:2009:i:5:p:494-508

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    Keywords: Absorptive capacity Demonstration effects FDI Spillovers;

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    Cited by:
    1. Anna Maria Ferragina & Fernanda Mazzotta & Erol Taymaz & Kamil Yilmaz, 2013. "The Impact Of Fdi On Firm Survival And Employment: A Comparative Analysis For Turkey And Italy," ERSA conference papers ersa13p1211, European Regional Science Association.
    2. Cesare Imbriani & Rosanna Pittiglio & Filippo Reganati & Edgardo Sica, 2011. "How much do technological gap, firm size, and regional characteristics matter for the absorptive capacity of Italian enterprises?," FIW Working Paper series 073, FIW.
    3. Joze P. Damijan & Matija Rojec & Boris Majcen & Mark Knell, 2008. "Impact of Firm Heterogeneity on Direct and Spillover Effects of FDI: Micro Evidence from Ten Transition Countries," LICOS Discussion Papers, LICOS - Centre for Institutions and Economic Performance, KU Leuven 21808, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    4. Wang, Chengqi & Deng, Ziliang & Kafouros, Mario I. & Chen, Yan, 2012. "Reconceptualizing the spillover effects of foreign direct investment: A process-dependent approach," International Business Review, Elsevier, vol. 21(3), pages 452-464.
    5. Franco, Chiara, 2013. "Exports and FDI motivations: Empirical evidence from U.S. foreign subsidiaries," International Business Review, Elsevier, vol. 22(1), pages 47-62.
    6. Hallin, Christina & Holmström Lind, Christine, 2012. "Revisiting the external impact of MNCs: An empirical study of the mechanisms behind knowledge spillovers from MNC subsidiaries," International Business Review, Elsevier, vol. 21(2), pages 167-179.
    7. Sánchez-Sellero, Pedro & Rosell-Martínez, Jorge & García-Vázquez, José Manuel, 2014. "Absorptive capacity from foreign direct investment in Spanish manufacturing firms," International Business Review, Elsevier, vol. 23(2), pages 429-439.
    8. Fu, Xiaolan & Helmers, Christian & Zhang, Jing, 2012. "The two faces of foreign management capabilities: FDI and productive efficiency in the UK retail sector," International Business Review, Elsevier, vol. 21(1), pages 71-88.

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