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Spillovers From Foreign Direct Investment:Within Or Between Industries?

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Author Info
Maurice Kugler ()

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Abstract

This paper contributes an estimation framework to measure both technological and linkage externalities from foreign direct investment (FDI). Empirical research dealt mainly with intra-industry spillovers from FDI with restrictive treatment of inter-industry effects until recently. However, as optimal organization of the multinational corporation (MNC) involves minimization of profit losses due to leakage of technical information to competitors, host country firms within the MNC’s sector experience limited productivity gains ensuing FDI. Host-country producers in other sectors may benefit. For example, MNCs transfer knowledge to local downstream clients, or outsource to local upstream suppliers. Hence, FDI substitutes within-sector domestic investment but complements it across sectors. The net impact on aggregate capital formation by host-country producers hinges on the interaction between linkages and spillovers. Estimations based on the Colombian Manufacturing Census yield the sectoral pattern of FDI spillovers displaying knowledge propagation between but not within industries. The findings reveal outsourcing relationships of MNCs with local upstream suppliers as a channel of diffusion.

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Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 003523.

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Length: 43
Date of creation: 01 Feb 2006
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Handle: RePEc:col:000094:003523

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References listed on IDEAS
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.:
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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. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2005. "Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants," IZA Discussion Papers 1751, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Sea Jin Chang & Jaiho Chung & Dean Xu, 2007. "FDI and Technology Spillovers in China," CEI Working Paper Series 2007-7, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  3. Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2006. "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," NBER Working Papers 12522, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Facundo Albornoz and Paolo Vanin, 2005. "Local Learning, Trade Policy and Industrial Structure Dynamics," Discussion Papers 05-12, Department of Economics, University of Birmingham. [Downloadable!]
  5. Paolo Figini & Holger Görg, 2007. "Does foreign direct investment affect wage inequality? An empirical investigation," The Institute for International Integration Studies Discussion Paper Series iiisdp186, IIIS. [Downloadable!]
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  6. Wong Tsen, 2006. "Granger causality tests among openness to international trade, human capital accumulation and economic growth in China: 1952--1999," International Economic Journal, Korean International Economic Association, vol. 20(3), pages 285-302, September. [Downloadable!] (restricted)
  7. Jonathan Eaton & Marcela Eslava & Maurice Kugler & James Tybout, 2007. "Export Dynamics in Colombia: Firm-Level Evidence," NBER Working Papers 13531, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Facundo Albornoz, 2007. "Subsidy Competition and the Mode of FDI: Acquisition vs Greenfield," Discussion Papers 05-15R, Department of Economics, University of Birmingham. [Downloadable!]
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  9. Facundo Albornoz & Grégory Corcos, 2005. "Subsidy competition in integrating economies," PSE Working Papers 2005-21, PSE (Ecole normale supérieure). [Downloadable!]
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  10. Marcella Nicolini & Laura Resmini, 2006. "The Impact of Mnes on Domestic Firms in CEECS: A Micro-Econometric Approach," ERSA conference papers ersa06p411, European Regional Science Association. [Downloadable!]
  11. Renata Kosova & Meghana Ayyagari, 2006. "Does FDI facilitate Domestic Entrepreneurship? Evidence from the Czech Republic," Working Papers 0008, School of Business, The George Washington University. [Downloadable!]
  12. Maurice Kugler & Hillel Rapoport, 2005. "Skilled Emigration, Business Networks and Foreign Direct Investment," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  13. F. Albornoz, M. Kugler, 2008. "Exporting Spillovers: Firm-Level Evidence from Argentina," Working Papers eg0057, Wilfrid Laurier University, Department of Economics, revised 2008. [Downloadable!]
  14. Jonathan Eaton & Marcela Eslava & Maurice Kugler & James Tybout, 2008. "Export Dynamics in Colombia: Transactions Level Evidence," BORRADORES DE ECONOMIA 004748, BANCO DE LA REPÚBLICA. [Downloadable!]
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