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Foreign direct investmant, spillovers and absorptive capacity: Evidence from quantile regressions

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Author Info
Sourafel Girma,
Holger Görg

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Abstract

This paper focuses on the role of absorptive capacity in determining whether or notdomestic firms benefit from productivity spillovers from FDI using establishment level data for the UK. We distinguish the effect of FDI in the same sector and region from FDI in the same sector but outside the region. We also allow for different effects of FDI on establishments located at different quantiles of the productivity distribution by using conditional quantile regression. Overall, while there is substantial heterogeneity in results across sectors and quantiles, our findings clearly suggest that both absorptive capacity and distance matter for productivity spillover benefits. We find evidence for a u-shaped relationship between absorptive capacity and productivity spillovers from FDI in the region, while there is an inverted u-shaped relationship for spillovers from FDI outside the region. We also analyse in some detail the impact of changes in absorptive capacity on establishments’ ability to benefit from spillovers.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp01.

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Length: 36 pages
Date of creation: 01 Jul 2003
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Handle: RePEc:iis:dispap:iiisdp01

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Keywords: foreign direct investment; absorptive capacity; productivity spillovers; quantile regressions;

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This paper has been announced in the following NEP Reports: 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.:
  1. John Cantwell, Simona Iammarino, 2000. "Multinational Corporations and the Location of Technological Innovation in the UK Regions," Regional Studies, Taylor and Francis Journals, vol. 34(4), pages 317-332, June. [Downloadable!] (restricted)
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  3. Glass, Amy Jocelyn & Saggi, Kamal, 1998. "International technology transfer and the technology gap," Journal of Development Economics, Elsevier, vol. 55(2), pages 369-398, April. [Downloadable!] (restricted)
  4. Holger Görg & Eric Strobl, 2003. "Multinational Companies, Technology Spillovers, and Plant Survival," Discussion Papers of DIW Berlin 366, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  5. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July. [Downloadable!] (restricted)
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  6. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April. [Downloadable!] (restricted)
  7. 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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  8. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  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. Driffield, Nigel, 2001. "The Impact of Domestic Productivity of Inward Investment in the UK," Manchester School, University of Manchester, vol. 69(1), pages 103-19, January. [Downloadable!] (restricted)
  11. Nigel Driffield & James H. Love, 2006. "Does The Motivation for Foreign Direct Investment Affect Productivity Spillovers to the Domestic Sector?," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(1), pages 3-27.
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  14. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, Oxford University Press, vol. 19(2), pages 171-197.
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  15. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January. [Downloadable!] (restricted)
  16. Findlay, Ronald, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, MIT Press, vol. 92(1), pages 1-16, February. [Downloadable!] (restricted)
  17. Brian J. Aitken & Ann E. Harrison, 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. [Downloadable!] (restricted)
  18. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2002. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," NBER Working Papers 8724, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August. [Downloadable!] (restricted)
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  20. Ari Kokko & Ruben Tansini & Mario Zejan, 1994. "Productivity spillovers from FDI in the Uruguayan manufacturing sector," Documentos de Trabajo (working papers) 0194, Department of Economics - dECON. [Downloadable!]
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  21. Audretsch, David B, 1998. "Agglomeration and the Location of Innovative Activity," CEPR Discussion Papers 1974, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  22. Girma, Sourafel & Greenaway, David & Wakelin, Katharine, 2001. "Who Benefits from Foreign Direct Investment in the UK?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 119-33, May. [Downloadable!] (restricted)
  23. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, vol. 111(475), pages F723-39, November. [Downloadable!] (restricted)
  24. Adsera, Alicia, 2000. "Sectoral spillovers and the price of land: a cost analysis," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 565-585, September. [Downloadable!] (restricted)
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  25. Girma, Sourafel & Wakelin, Katharine, 2001. "Regional Underdevelopment: Is FDI the Solution? A Semiparametric Analysis," CEPR Discussion Papers 2995, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  26. Salvador Barrios, . "Foreign Direct Investment and Productivity Spillovers," Working Papers 2000-19, FEDEA. [Downloadable!]
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  28. Görg, Holger & Greenaway, David, 2002. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Investment?," CEPR Discussion Papers 3485, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Full references

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. B. Merlevede & K. Schoors, 2006. "FDI and the Consequences Towards more complete capture of spillover effects," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/372, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
    Other versions:
  2. Juan Carluccio & Thibault Fally, 2008. "Multinationals, technological incompatibilities and spillovers," PSE Working Papers 2008-63, PSE (Ecole normale supérieure). [Downloadable!]
  3. Nuno Crespo & Isabel Proença & Maria Paula Fontoura, 2007. "FDI Spillovers at Regional Level: Evidence from Portugal," Working Papers 2007/28, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
    Other versions:
  4. Della Temenggung, 2007. "Productivity Spillovers from Foreign Direct Investment: Indonesian Manufacturing Industry’s Experience 1975-2000," DEGIT Conference Papers c012_048, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  5. Görg, Holger & Greenaway, David, 2003. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," IZA Discussion Papers 944, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Anna Maria Falzoni & Mara Grasseni, 2005. "Home Country Effects of Investing Abroad: Evidence from Quantile Regressions," CESPRI Working Papers 170, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Jun 2005. [Downloadable!]
  7. Görg, Holger & Greenaway, David, 2002. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Investment?," CEPR Discussion Papers 3485, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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