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Foreign Direct Investment, Competitive Pressure and Spillovers. An Empirical Analysis on Spanish Firm Level Data

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Author Info
Alessandro Sembenelli (University of Torino)
Georges Siotis (Carlos III University, Madrid)

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Abstract

A 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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Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 169.

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Date of creation: 01 Nov 2002
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Handle: RePEc:csl:devewp:169

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Related research
Keywords: Foreign Direct Investment; Technology Transfer; E¢-;

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Find related papers by JEL classification:
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

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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  5. 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. [Downloadable!] (restricted)
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  6. Fosfuri, Andrea & Motta, Massimo, 1999. " Multinationals without Advantages," Scandinavian Journal of Economics, Blackwell Publishing, vol. 101(4), pages 617-30, December. [Downloadable!] (restricted)
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  7. Boone, J., 2000. "Competition," Discussion Paper 104, Tilburg University, Center for Economic Research. [Downloadable!]
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  8. 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.
  9. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Blackwell Publishing, vol. 12(3), pages 247-77, July. [Downloadable!] (restricted)
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  10. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development. [Downloadable!]
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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. 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. [Downloadable!] (restricted)
    Other versions:
  2. Nuno Crespo & Isabel Proença & Maria Paula Fontoura, 2008. "FDI Spillovers at Regional Level: Evidence from Portugal," Working Papers ercwp0508, ISCTE, UNIDE, Economics Research Centre. [Downloadable!]
    Other versions:
  3. Elisa Galeotti, 2009. "Do Domestic Firms Benefit from Geographical Proximity with Foreign Investors? Evidence from the Privatization of the Czech Glass Industry," AUCO Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 026-047, March. [Downloadable!]
  4. Chang, Sea Jin & Chung, Jaiho & Xu, Dean, 2007. "FDI and Technology Spillovers in China," CEI Working Paper Series 2007-7, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  5. 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. [Downloadable!]
    Other versions:
  6. Stefanie A. Haller, 2005. "The Impact of Multinational Entry on Domestic Market Structure and R&D," Economics Working Papers ECO2005/16, European University Institute. [Downloadable!]
  7. Hugo Rojas-Romagosa, 2006. "Productivity Effects of FDI Inflows: A Literature Review," CPB Memoranda 170, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
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