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Spillovers from foreign direct investment and firm growth: technological, financial and market structure effects

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  • Sophia Dimelis
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    Abstract

    This article examines spillover effects from inward investment on domestic firm growth in the case of a developed host country. The emphasis is placed on the role of the technological gap between domestic and foreign firms in identifying the importance of technology diffusion from the presence of multinationals. An augmented production function is employed to account for technological, financial and market structure effects. Based on a sample of 2589 manufacturing firms operating in Greece between 1992 and 1997, the analysis provides evidence that the significance of spillovers varies with the relative technological position of domestic firms and is higher in the middle and upper quantiles of the growth distribution. It was estimated that a unit increase in the foreign presence in Greek industry raises output growth by 7% on average, in a five-year period, after controlling for technological differences among firms. This result is consistent with the 'absorptive capacity' hypothesis that the technological capability of the host country relates positively to FDI spillover benefits.

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    File URL: http://www.tandfonline.com/10.1080/1357151042000323094
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

    Volume (Year): 12 (2005)
    Issue (Month): 1 ()
    Pages: 85-104

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    Handle: RePEc:taf:ijecbs:v:12:y:2005:i:1:p:85-104

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    Web page: http://www.tandfonline.com/CIJB20

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    Related research

    Keywords: Foreign Direct Investment; Growth; Productivity; Spillovers; Technological Gap; Absorptive capacity; JEL Classification: F23; O30;

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    Cited by:
    1. Hamida, Lamia Ben, 2013. "Are there regional spillovers from FDI in the Swiss manufacturing industry?," International Business Review, Elsevier, vol. 22(4), pages 754-769.
    2. Crespo, Nuno & Fontoura, Maria Paula, 2007. "Determinant Factors of FDI Spillovers - What Do We Really Know?," World Development, Elsevier, vol. 35(3), pages 410-425, March.
    3. Barbosa, Natália & Eiriz, Vasco, 2009. "Linking corporate productivity to foreign direct investment: An empirical assessment," International Business Review, Elsevier, vol. 18(1), pages 1-13, February.
    4. Rosanna Pittiglio & Filippo Reganati & Edgardo Sica, 2012. "Do Multinational Enterprises push up the Wages of Domestic Firms in the Italian Manufacturing Sector?," FIW Working Paper series 099, FIW.
    5. Ben Hamida, Lamia & Gugler, Philippe, 2009. "Are there demonstration-related spillovers from FDI?: Evidence from Switzerland," International Business Review, Elsevier, vol. 18(5), pages 494-508, October.
    6. 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.
    7. 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.
    8. 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.

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