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.
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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
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