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Foreign direct investment and innovation in Central and eastern Europe : evidence from Estonia

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  • Masso, Jaan

    ()

  • Roolaht, Tõnu

    ()

  • Varblane, Urmas

    ()

Abstract

A growing literature is trying to analyse the productivity gap between domestic and foreign firms with differences in innovation indicators. In our paper we analyse the relationship between inward and outward FDI at either company or industry level and the innovation behaviour of companies in Estonia. We use company-level data from three waves of the Community Innovation Surveys, which are combined with financial data from the Estonian Business Register and FDI data from the balance of payments statistics. For the analysis we apply a structural model involving equations on innovation expenditure, innovation outcome and productivity, and also innovation accounting and propensity score matching approaches. Our results show that the higher innovation output of foreign owned companies vanishes after various company characteristics are controlled for, but there were significant differences in innovation inputs such as the higher use of knowledge sourcing and the lower importance of various impeding factors. Outward investment has a positive influence on innovativeness among both domestic and foreign owned companies

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Bibliographic Info

Paper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number wp2010-05.

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Date of creation: 14 Apr 2010
Date of revision: 14 Apr 2010
Handle: RePEc:eea:boewps:wp2010-05

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Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
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Keywords: innovation; internationalisation; foreign direct investments; catching-up countries;

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Citations

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Cited by:
  1. Priit Vahter, 2010. "Does FDI spur innovation, productivity and knowledge sourcing by incumbent firms? Evidence from manufacturing industry in Estonia," William Davidson Institute Working Papers Series wp986, William Davidson Institute at the University of Michigan.
  2. Kadri Männasoo & Jaanika Meriküll, 2011. "How do demand fluctations and credit constraints affect R&D? Evidence from Central, Southern and Eastern Europe," Bank of Estonia Working Papers wp2011-09, Bank of Estonia, revised 19 Jul 2011.

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