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Firm size and spillover effects from foreign direct investment: the case of Romania

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  • Karolien Lenaerts
  • Bruno Merlevede

Abstract

This paper introduces firm size in the analysis of the productivity spillovers of foreign direct investment. Our analysis of a panel of Romanian firms reveals two main findings: only medium-sized foreign firms generate spillovers, and domestic firms’ size is of limited importance to identify which firms absorb spillovers. To explain these findings, we show that large foreign firms are less embedded in the domestic economy because they are more likely to bring their own suppliers, import intermediate inputs and export their output. Smaller foreign firms lack the scale to transmit spillovers to domestic firms. Whereas foreign firms’ size adequately proxies for these spillover mechanisms, domestic firms’ size has an unclear relationship with the different mechanisms. Copyright Springer Science+Business Media New York 2015

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  • Karolien Lenaerts & Bruno Merlevede, 2015. "Firm size and spillover effects from foreign direct investment: the case of Romania," Small Business Economics, Springer, vol. 45(3), pages 595-611, October.
    • Handle: RePEc:kap:sbusec:v:45:y:2015:i:3:p:595-611
    DOI: 10.1007/s11187-015-9652-2
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    Cited by:

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    4. Iwasaki, Ichiro & Tokunaga, Masahiro, 2016. "Technology transfer and spillovers from FDI in transition economies: A meta-analysis," Journal of Comparative Economics, Elsevier, vol. 44(4), pages 1086-1114.
    5. Randolph Luca Bruno & Maria Cipollina, 2018. "A meta†analysis of the indirect impact of foreign direct investment in old and new EU member states: Understanding productivity spillovers," The World Economy, Wiley Blackwell, vol. 41(5), pages 1342-1377, May.
    6. Opoku Adabor & Eric Fosu Oteng-Abayie & Emmanuel Buabeng, 2023. "The impact of foreign direct investment on the growth of the manufacturing sector: exploring the role of institutional quality in Ghana," SN Business & Economics, Springer, vol. 3(1), pages 1-25, January.
    7. Uwitonze, Eric & Heshmati, Almas, 2016. "Service Sector Development and its Determinants in Rwanda," IZA Discussion Papers 10117, Institute of Labor Economics (IZA).
    8. Bram De Lange & Bruno Merlevede, 2020. "State-Owned Enterprises across Europe: Stylized Facts from a Large Firm-level Dataset," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 20/1006, Ghent University, Faculty of Economics and Business Administration.
    9. Francesca de Nicola & Balázs Muraközy & Shawn W. Tan, 2021. "Spillovers from high growth firms: evidence from Hungary," Small Business Economics, Springer, vol. 57(1), pages 127-150, June.
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    11. Ogbeifun Lawrence & Shobande Olatunji Abdul, 2020. "Causality Analysis of Disaggregated FDI Inflows on Sectorial Growth in OECD Area," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 30(4), pages 92-110, December.
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    More about this item

    Keywords

    Foreign direct investment; Spillovers; Firm size; Supply chain; F2; D24; L23; L25; L26;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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