Foreign Direct Investment, Competitive Pressure and Spillovers. An Empirical Analysis on Spanish Firm Level Data
AbstractA short review of the theoretical and empirical evidence indicates that Foreign Direct Investment (FDI) has the potential to increase the intensity of competition as well as to act as a channel for technology transfers. One would expect, all else equal, an increase in average productivity following a wave of FDI, as multinational corporations (MNCs) enjoy higher levels of e¢ciency. At the same time, the entry of foreign firms has also been associated with an increase in competitive pressure on the domestic market. Using a large …rm level data set covering all sectors of Spanish manufacturing during the period 1983-1996, we attempt to disentangle these two effects by estimating a dynamic model of firm level profitability. We find that FDI has a positive long-run e¤ect on the pro…tability of target firms, but this is limited to firms belonging to R&D intensive sectors. In addition, the results indicate that foreign presence dampens margins. However, this e¤ect appears to be more than compensated by positive spillovers in the case of knowledge intensive industries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 169.
Date of creation: 01 Nov 2002
Date of revision:
Foreign Direct Investment; Technology Transfer; E¢-;
Other versions of this item:
- Sembenelli, Alessandro & Siotis, Georges, 2005. "Foreign Direct Investment, Competitive Pressure and Spillovers. An Empirical Analysis of Spanish Firm Level Data," CEPR Discussion Papers 4903, C.E.P.R. Discussion Papers.
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
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.:
- Luigi Benfratello & Alessandro Sembenelli, 2002.
"Foreign Ownership and Productivity: is the Direction of Causality so Obvious?,"
Development Working Papers
166, Centro Studi Luca d\'Agliano, University of Milano.
- Benfratello, Luigi & Sembenelli, Alessandro, 2006. "Foreign ownership and productivity: Is the direction of causality so obvious?," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 733-751, July.
- Fosfuri, Andrea & Motta, Massimo, 1999. " Multinationals without Advantages," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 617-30, December.
- Neven, D. & Siotis, G., 1996.
"Technology sourcing and FDI in the EC: An empirical evaluation,"
International Journal of Industrial Organization,
Elsevier, vol. 14(5), pages 543-560, July.
- Damien NEVEN & George SIOTIS, 1995. "Technology Sourcing and FDI in the EC : An Empirical Evaluation," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 9508, Université de Lausanne, Faculté des HEC, DEEP.
- Blomström, Magnus & Kokko, Ari, 1996.
"Multinational Corporations and Spillovers,"
CEPR Discussion Papers
1365, C.E.P.R. Discussion Papers.
- Wang, Jian-Ye & Blomstrom, Magnus, 1992.
"Foreign investment and technology transfer : A simple model,"
European Economic Review,
Elsevier, vol. 36(1), pages 137-155, January.
- Magnus Blomstrom & Jian-Ye Wang, 1992. "Foreign Investment and Technology Transfer: A Simple Model," NBER Working Papers 2958, National Bureau of Economic Research, Inc.
- Boone, J., 2000.
2000-104, Tilburg University, Center for Economic Research.
- Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
- Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
- Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Business Cycles and the Relationship Between Concentration and Price-Cost Margins," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 1-17, Spring.
- Conyon, Martin J, et al, 2002. "The Productivity and Wage Effects of Foreign Acquisition in the United Kingdom," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 85-102, March.
- Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
- Nigel Driffield & James H. Love, 2003. "Foreign Direct Investment, Technology Sourcing and Reverse Spillovers," Manchester School, University of Manchester, vol. 71(6), pages 659-672, December.
- Blundell, Richard & Bond, Stephen, 1998.
"Initial conditions and moment restrictions in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 87(1), pages 115-143, August.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
- Ignacio Hernando & Javier Valles, 1994. "Algunas diferencias en la productividad de las empresas manufactureras españolas," Investigaciones Economicas, Fundación SEPI, vol. 18(1), pages 117-141, January.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Siotis, Georges, 2003. "Competitive pressure and economic integration: an illustration for Spain, 1983-1996," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1435-1459, December.
- Neven, Damien & Siotis, Georges, 1993. "Foreign Direct Investment in the European Community: Some Policy Issues," Oxford Review of Economic Policy, Oxford University Press, vol. 9(2), pages 72-93, Summer.
- Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
- B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
- James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
- Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-69, June.
- Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
- Stefanie A. Haller, 2005. "The Impact of Multinational Entry on Domestic Market Structure and R&D," Economics Working Papers ECO2005/16, European University Institute.
- Holger Görg & Alexander Hijzen & Balázs Muraközy, 2009.
"The role of production technology for productivity spillovers from multinationals: Firm-level evidence for Hungary,"
CeFiG Working Papers
5, Center for Firms in the Global Economy, revised 01 Feb 2009.
- Holger Görg & Alexander Hijzen & Balazs Muraközy, 2009. "The role of production technology for productivity spillovers from multinationals: Firm-level evidence for Hungary," Kiel Working Papers 1482, Kiel Institute for the World Economy.
- Nuno Crespo & Isabel Proença & Maria Paula Fontoura, 2007.
"FDI Spillovers at Regional Level: Evidence from Portugal,"
2007/28, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..
- Nuno Crespo & Maria Paula Fontoura & Isabel Proença, 2009. "FDI spillovers at regional level: Evidence from Portugal," Papers in Regional Science, Wiley Blackwell, vol. 88(3), pages 591-607, 08.
- Nuno Crespo & Isabel Proença & Maria Paula Fontoura, 2008. "FDI Spillovers at Regional Level: Evidence from Portugal," Working Papers Series 1 ercwp0508, ISCTE-IUL, Business Research Unit (BRU-IUL).
- Elisa Galeotti, 2009. "Do Domestic Firms Benefit from Geographical Proximity with Foreign Investors? Evidence from the Privatization of the Czech Glass Industry," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 026-047, March.
- Hugo Rojas-Romagosa, 2006. "Productivity Effects of FDI Inflows: A Literature Review," CPB Memorandum 170, CPB Netherlands Bureau for Economic Policy Analysis.
- Gorodnichenko, Yuriy & Svejnar, Jan & Terrell, Katherine, 2007.
"When Does FDI Have Positive Spillovers? Evidence from 17 Emerging Market Economies,"
CEPR Discussion Papers
6546, C.E.P.R. Discussion Papers.
- Gorodnichenko, Yuriy & Svejnar, Jan & Terrell, Katherine, 2007. "When Does FDI Have Positive Spillovers? Evidence from 17 Emerging Market Economies," IZA Discussion Papers 3079, Institute for the Study of Labor (IZA).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chiara Elli).
If references are entirely missing, you can add them using this form.