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Foreign Direct Investment, Spillovers and Absorptive Capacity: Evidence from Quantile Regressions

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  • Sourafel Girma
  • Holger Görg

Abstract

This paper focuses on the role of absorptive capacity in determining whether or not domestic firms benefit from productivity spillovers from FDI using establishment level data for the UK. We 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 some heterogeneity in results across sectors and quantiles, our findings clearly suggest that absorptive capacity matters for productivity spillover benefits. We find evidence for a u-shaped relationship between productivity growth and FDI interacted with absorptive capacity. We also analyse in some detail the impact of changes in absorptive capacity on establishments’ ability to benefit from spillovers.

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1248.

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Length: 23 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:kie:kieliw:1248

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

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Citations

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Cited by:
  1. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, World Bank Group, vol. 19(2), pages 171-197.
  2. Gábor Békés & Jörn Kleinert & Farid Toubal, 2009. "Spillovers from Multinationals to Heterogeneous Domestic Firms: Evidence from Hungary," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00641328, HAL.
  3. Nuno Crespo & Maria Paula Fontoura & Isabel Proença, 2009. "FDI spillovers at regional level: Evidence from Portugal," Papers in Regional Science, Wiley Blackwell, vol. 88(3), pages 591-607, 08.
  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.
  5. 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.
  6. Svetlana Batrakova & Ronald Davies, 2010. "Is there an environmental benefit to being an exporter? Evidence from firm level data," The Institute for International Integration Studies Discussion Paper Series iiisdp322, IIIS, revised Mar 2010.
  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.
  8. Richard Harris, 2009. "Spillover and backward linkage effects of FDI: empirical evidence for the UK," LSE Research Online Documents on Economics 33206, London School of Economics and Political Science, LSE Library.
  9. László Halpern & Balázs Muraközy, 2007. "Does distance matter in spillover?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15, pages 781-805, October.
  10. Anna Maria Falzoni & Mara Grasseni, 2005. "Home Country Effects of Investing Abroad: Evidence from Quantile Regressions," KITeS Working Papers 170, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jun 2005.

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