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Home Versus Host Country Effects of FDI: Searching for New Evidence of Productivity Spillovers

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  • Priit Vahter

    ()

  • Jaan Masso

    ()

Abstract

The aim of this paper is to study the effects of both inward and outward foreign direct investment (FDI) on productivity. The main novelty is the analysis of the spillover effects of outward FDI that may occur outside the investing firms on the rest of the home country. The effects are addressed both for the manufacturing and services sectors. To our best knowledge there have so far been no studies based on enterprise-level panel data analysing the spillovers of outward FDI in the production function estimation framework. We find that engaging in outward FDI or receiving inward FDI is positively related to the productivity of the parent firm in Estonia or the subsidiary in Estonia. We do not find much evidence of positive spillovers via outward or inward FDI that is robust to the specification of the model or does not depend on the sector being studied. The results on spillover effects vary according to different specifications of the spillover variable, sector or the model, being either statistically insignificant or, in some cases, positive.

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Bibliographic Info

Paper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number 2005-13.

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Length: 47 pages
Date of creation: 10 Dec 2005
Date of revision: 10 Dec 2005
Publication status: published
Handle: RePEc:eea:boewps:wp2005-13

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Keywords: foreign direct investment; spillovers; home country effects; productivity;

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References

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Citations

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Cited by:
  1. Wen-Chung Hsu & Xingbo Gao & Jianhua Zhang & Hsin Mei Lin, 2011. "The effects of outward FDI on home-country productivity: Do location of investment and market orientation matter?," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 4(2), pages 99-116, June.
  2. Ivo Karilaid & Tõnn Talpsepp, 2010. "Can policy improve liquidity during a financial crisis?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 10(2), pages 5-26, December.
  3. Hanousek, Jan & Kocenda, Evzen & Maurel, Mathilde, 2011. "Direct and indirect effects of FDI in emerging European markets: A survey and meta-analysis," Economic Systems, Elsevier, vol. 35(3), pages 301-322, September.
  4. Christian Zeller & Andreas Hametner & Koen Smet & Markus Seiwald, 2014. "Internationale Expansion in der pharmazeutischen Industrie Österreichs," FIW Research Reports series, FIW V-004, FIW.
  5. Altomonte, C. & Pennings, H.P.G., 2009. "Domestic Plant Productivity and Incremental Spillovers from Foreign Direct Investment," ERIM Report Series Research in Management, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasm ERS-2009-012-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
  6. Masso, Jaan & Roolaht, Tõnu & Varblane, Urmas, 2010. "Foreign direct investment and innovation in Central and eastern Europe : evidence from Estonia," Bank of Estonia Working Papers, Bank of Estonia wp2010-05, Bank of Estonia, revised 14 Apr 2010.
  7. Rõigas, Kärt, 2011. "Linkage between productivity and innovation in different service sectors," Discourses in Social Market Economy 2011-02, OrdnungsPolitisches Portal (OPO).
  8. Iwasaki, Ichiro & Tokunaga, Masahiro, 2013. "Spillover versus Ownership: A Meta-Analysis of Transition Literature," RRC Working Paper Series, Russian Research Center, Institute of Economic Research, Hitotsubashi University 42, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
  9. Priit Vahter, 2010. "Does Fdi Spur Innovation, Productivity And Knowledge Sourcing By Incumbent Firms? Evidence From Manufacturing Industry In Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series, Faculty of Economics and Business Administration, University of Tartu (Estonia) 69, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  10. repec:hal:journl:halshs-00469544 is not listed on IDEAS
  11. Dierk Herzer, 2010. "The Long-Run Relationship between Outward FDI and Total Factor Productivity: Evidence for Developing Countries," Ibero America Institute for Econ. Research (IAI) Discussion Papers 199, Ibero-America Institute for Economic Research.
  12. Cantner, Uwe & Günther, Jutta & Hassan, Sohaib Shahzad & Jindra, Björn, 2013. "Outward FDI from the Central and Eastern European Transition Economies – A Discrete Choice Analysis of Location Choice within the European Union," MPRA Paper 51817, University Library of Munich, Germany, revised 04 Jun 2013.
  13. Cantner, Uwe & Günther, Jutta & Hassan, Sohaib Shahzad & Jindra, Björn, 2013. "Outward FDI from Central and East European Transition Economies – A discrete choice analysis of location within the EU," MPRA Paper 51804, University Library of Munich, Germany, revised 12 Aug 2013.
  14. Priit Vahter, 2006. "Productivity in Estonian enterprises: the role of innovation and competition," Bank of Estonia Working Papers, Bank of Estonia 2006-07, Bank of Estonia, revised 11 Dec 2006.

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