This paper investigates the impact of foreign direct investment on the productivity performance of domestic firms in Portugal. The data comprise nine manufacturing sectors for the period 1992-95. Relatively to previous studies, model specification is improved by taking into consideration several aspects: the influence of the "technological gap" on spill-overs diffusion and the choice of its most appropriate interval; sectoral variation in the coefficients of the spill-overs effect; identification of constant, idiosyncratic sectoral factors by means of a fixed effects model; and the search for inter-sectoral positive spillover effects. The relationship between domestic firms productivity and the foreign presence does take place in a positive way, only if a proper technology differential between the foreign and domestic producers exists and the sectoral characteristics are favourable. In broad terms, spillovers diffusion is associated to modem industries in which the foreign owned establishments have a clear, but not too sharp, edge on the domestic ones. Besides, other specific sectoral influences can be pertinent; agglomerative location factors being one example.
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Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number
2000/04.
Length: Date of creation: 2000 Date of revision: Handle: RePEc:ise:isegwp:wp42000
Contact details of provider: Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL Web page: http://www.iseg.utl.pt/departamentos/economia/
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Find related papers by JEL classification: F14 - International Economics - - Trade - - - Country and Industry Studies of Trade O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe