Advanced Search
MyIDEAS: Login

Impact of Firm Heterogeneity on Direct and Spillover Effects of FDI: Micro Evidence from Ten Transition Countries

Contents:

Author Info

  • Joze P. Damijan
  • Matija Rojec
  • Boris Majcen
  • Mark Knell

Abstract

This paper presents a comparative study of the importance of direct technology transfer and spillovers through FDI on a set of ten transition countries, using a common methodology and appropriate methods to account for selection and simultaneity correction. This paper considers by far the largest firm level dataset (more than 90,000 firms) used by any study on the spillover effects of FDI. The main novelty of the paper is the explicit control for various sources of firm heterogeneity when accounting for different effects of FDI on firm performance. Controlling for these variables leads to some interesting results which contrast with the previous empirical work in the field. We find that horizontal spillovers have become increasingly important over the last decade, and they may even become more important than vertical spillovers. Furthermore, this work shows that the heterogeneity of firms in terms of absorptive capacity, size, productivity and technology levels affect the results. These findings suggest that both direct effects from foreign ownership as well as the spillovers from foreign firms substantially depend on the absorptive capacity and productivity level of individual firms. Only more productive firms and firms with higher absorptive capacities are able to both compete with foreign affiliates in the same sector and benefit from the increased upstream demand for intermediates generated by foreign affiliates. In addition, these results show that foreign presence may also affect smaller firms to a larger extent than larger firms, but this impact may be in either direction.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp218.pdf
Download Restriction: no

Bibliographic Info

Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 21808.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:lic:licosd:21808

Contact details of provider:
Postal: De Bériotstraat 34, B-3000 Leuven
Phone: +32 (0) 16 / 32 6598
Fax: +32 (0) 16 / 32 6599
Email:
Web page: http://www.econ.kuleuven.be/licos
More information through EDIRC

Related research

Keywords: Foreign direct investment; technology transfer; spillovers; transition economies; firm heterogeneity;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Kugler, Maurice, 2006. "Spillovers from foreign direct investment: Within or between industries?," Journal of Development Economics, Elsevier, vol. 80(2), pages 444-477, August.
  2. John Cantwell, 1987. "The Reorganization of European Industries After Integration: Selected Evidence on the Role of Multinational Enterprise Activities," Journal of Common Market Studies, Wiley Blackwell, vol. 26(2), pages 127-151, December.
  3. Samuel S. Kortum & Jonathan Eaton, 1995. "Trade in ideas: patenting and productivity in the OECD," Finance and Economics Discussion Series 95-9, Board of Governors of the Federal Reserve System (U.S.).
  4. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  6. Wolfgang Keller & Stephen R. Yeaple, 2005. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," Kiel Working Papers 1249, Kiel Institute for the World Economy.
  7. Adam B. Jaffe & Manuel Trajtenberg, 1998. "International Knowledge Flows: Evidence from Patent Citations," NBER Working Papers 6507, National Bureau of Economic Research, Inc.
  8. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "learning-by-exporting" important? Micro-dynamic evidence from Colombia, Mexico and Morocco," Finance and Economics Discussion Series 96-30, Board of Governors of the Federal Reserve System (U.S.).
  9. Blomstrom, Magnus & Sjoholm, Fredrik, 1999. "Technology transfer and spillovers: Does local participation with multinationals matter?1," European Economic Review, Elsevier, vol. 43(4-6), pages 915-923, April.
  10. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  11. Joel Rodrigue & Hiroyuki Kasahara, 2004. "Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence," Econometric Society 2004 North American Summer Meetings 511, Econometric Society.
  12. Magnus Blomstrom & Edward N. Wolff, 1989. "Multinational Corporations and Productivity Convergence in Mexico," NBER Working Papers 3141, National Bureau of Economic Research, Inc.
  13. Balázs, Muraközy & Halpern, László, 2005. "Does Distance Matter in Spillover?," CEPR Discussion Papers 4857, C.E.P.R. Discussion Papers.
  14. Resmini, Laura & Nicolini, Marcella, 2007. "Productivity Spillovers from Foreign Investment: The Role of Neglected Conditionalities," Papers DYNREG11, Economic and Social Research Institute (ESRI).
  15. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 245-276.
  16. Tomas Havranek & Zuzana Irsova, 2010. "Which Foreigners are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI," William Davidson Institute Working Papers Series wp996, William Davidson Institute at the University of Michigan.
  17. James R. Markusen & Anthony J. Venables, 1997. "Foreign Direct Investment as a Catalyst for Industrial Development," NBER Working Papers 6241, National Bureau of Economic Research, Inc.
  18. 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.
  19. Djankov, Simeon & Hoekman, Bernard M, 2000. "Foreign Investment and Productivity Growth in Czech Enterprises," World Bank Economic Review, World Bank Group, vol. 14(1), pages 49-64, January.
  20. Mansfield, Edwin & Romeo, Anthony, 1980. "Technology Transfer to Overseas Subsidiaries by U.S.-Based Firms," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 737-50, December.
  21. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Chapters, in: Resource and Output Trends in the United States Since 1870, pages 1-23 National Bureau of Economic Research, Inc.
  22. Sourafel Girma & Holger Görg, 2007. "Multinationals' Productivity Advantage: Scale Or Technology?," Economic Inquiry, Western Economic Association International, vol. 45(2), pages 350-362, 04.
  23. Arnold, Jens & Smarzynska Javorcik, Beata, 2005. "Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia," CEPR Discussion Papers 5065, C.E.P.R. Discussion Papers.
  24. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
  25. Feenstra, Robert C & Markusen, James R, 1994. "Accounting for Growth with New Inputs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 429-47, May.
  26. Girma, Sourafel & Gong, Yundan & Görg, Holger, 2006. "Can You Teach Old Dragons New Tricks? FDI and Innovation Activity in Chinese State-Owned Enterprises," IZA Discussion Papers 2267, Institute for the Study of Labor (IZA).
  27. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1, May.
  28. Veugelers, Reinhilde & Cassiman, Bruno, 1999. "Make and buy in innovation strategies: evidence from Belgian manufacturing firms," Research Policy, Elsevier, vol. 28(1), pages 63-80, January.
  29. Smarzynska, Beata K., 2002. "Does foreign direct investment increase the productivity of domestic firms : in search of spillovers through backward linkages," Policy Research Working Paper Series 2923, The World Bank.
  30. Griliches, Zvi, 1992. " The Search for R&D Spillovers," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S29-47, Supplemen.
  31. Ben Hamida, Lamia & Gugler, Philippe, 2009. "Are there demonstration-related spillovers from FDI?: Evidence from Switzerland," International Business Review, Elsevier, vol. 18(5), pages 494-508, October.
  32. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
  33. Damijan, Joze P. & Knell, Mark & Majcen, Boris & Rojec, Matija, 2003. "The role of FDI, R&D accumulation and trade in transferring technology to transition countries: evidence from firm panel data for eight transition countries," Economic Systems, Elsevier, vol. 27(2), pages 189-204, June.
  34. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  35. 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.
  36. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  37. Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 3-61.
  38. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
  39. Susanto Basu & John G. Fernald, 1995. "Aggregate Productivity and the Productivity of Aggregates," NBER Working Papers 5382, National Bureau of Economic Research, Inc.
  40. Sjoholm, Fredrik, 1999. "Productivity Growth in Indonesia: The Role of Regional Characteristics and Direct Foreign Investment," Economic Development and Cultural Change, University of Chicago Press, vol. 47(3), pages 559-84, April.
  41. Lee Branstetter, 2000. "Is Foreign Direct Investment a Channel of Knowledge Spillovers? Evidence from Japan's FDI in the United States," NBER Working Papers 8015, National Bureau of Economic Research, Inc.
  42. Sourafel Girma & David Greenaway & Katharine Wakelin, 2013. "Who Benefits from Foreign Direct Investment in the UK?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(5), pages 560-574, November.
  43. Jeffrey Bernstein & Pierre Mohnen, . "International R&D Spillovers Between U.S. and Japanese R&D Intensive Sectors," Carleton Industrial Organization Research Unit (CIORU) 94-04, Carleton University, Department of Economics.
  44. Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
  45. Magnus Blomström & Ari Kokko & Mario Zejan, 1994. "Host country competition, labor skills, and technology transfer by multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(3), pages 521-533, September.
  46. Lee Branstetter, 1996. "Are Knowledge Spillovers International or Intranational in Scope? Microeconometric Evidence from the Japan and the United States," NBER Working Papers 5800, National Bureau of Economic Research, Inc.
  47. Davide Castellani & Antonello Zanfei, 2003. "Technology gaps, absorptive capacity and the impact of inward investments on productivity of European firms ," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(6), pages 555-576.
  48. Rossitza B. Wooster & David S. Diebel, 2010. "Productivity Spillovers from Foreign Direct Investment in Developing Countries: A Meta-Regression Analysis," Review of Development Economics, Wiley Blackwell, vol. 14(s1), pages 640-655, 08.
  49. Blomström, Magnus & Globerman, Steve & Kokko, Ari, 2000. "The Determinants of Host Country Spillovers from Foreign Direct Investment," CEPR Discussion Papers 2350, C.E.P.R. Discussion Papers.
  50. Wolfgang Keller, 1997. "Are International R&D Spillovers Trade-Related? Analyzing Spillovers Among Randomly Matched Trade Partners," NBER Working Papers 6065, National Bureau of Economic Research, Inc.
  51. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
  52. Yuko Kinoshita, 2000. "R&D and Technology Spillovers via FDI: Innovation and Absorptive Capacity," William Davidson Institute Working Papers Series 349, William Davidson Institute at the University of Michigan.
  53. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  54. Molly Lesher & Sébastien Miroudot, 2008. "FDI Spillovers and their Interrelationships with Trade," OECD Trade Policy Papers 80, OECD Publishing.
  55. Salvador Barrios & Holger Görg & Eric Strobl, 2009. "Spillovers through backward linkages from multinationals: Measurement matters!," Kiel Working Papers 1560, Kiel Institute for the World Economy.
  56. Audretsch, David B, 1998. "Agglomeration and the Location of Innovative Activity," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 18-29, Summer.
  57. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
  58. James R. Markusen & James R. Melvin, 1981. "Trade, Factor Prices, and the Gains from Trade with Increasing Returns to Scale," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 450-69, August.
  59. 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.
  60. Hoekman, Bernard & Mattoo, Aaditya, 2008. "Services trade and growth," Policy Research Working Paper Series 4461, The World Bank.
  61. Wolfgang Keller, 1997. "Trade and the Transmission of Technology," Development and Comp Systems 9707001, EconWPA.
  62. Irina Tytell & Ksenia Yudaeva, 2005. "The Role of FDI in Eastern Europe and New Independent States: New Channels for the Spillover Effect," Working Papers w0060, Center for Economic and Financial Research (CEFIR).
  63. De Loecker, Jan, 2007. "Do exports generate higher productivity? Evidence from Slovenia," Journal of International Economics, Elsevier, vol. 73(1), pages 69-98, September.
  64. Baumol, William J. & Nelson, Richard R. & Wolff, Edward N. (ed.), 1994. "Convergence of Productivity: Cross-National Studies and Historical Evidence," OUP Catalogue, Oxford University Press, number 9780195083903.
  65. Davide Castellani & Antonello Zanfei, 2007. "Multinational companies and productivity spillovers: is there a specification error?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1047-1051.
  66. Renáta Kosová, 2010. "Do Foreign Firms Crowd Out Domestic Firms? Evidence from the Czech Republic," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 861-881, November.
  67. Yuko Kinoshita, 2000. "R&D and technology spillovers via FDI: Innovation and absorptive capacity," CERGE-EI Working Papers wp163, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  68. 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.
  69. Ethier, Wilfred, 1979. "Internationally decreasing costs and world trade," Journal of International Economics, Elsevier, vol. 9(1), pages 1-24, February.
  70. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  71. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
  72. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
  73. Arnold, Jens M. & Javorcik, Beata S. & Mattoo, Aaditya, 2011. "Does services liberalization benefit manufacturing firms?: Evidence from the Czech Republic," Journal of International Economics, Elsevier, vol. 85(1), pages 136-146, September.
  74. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Tomas Havranek & Zuzana Irsova, 2012. "Survey Article: Publication Bias in the Literature on Foreign Direct Investment Spillovers," Journal of Development Studies, Taylor & Francis Journals, vol. 48(10), pages 1375-1396, October.
  2. Joze P. Damijan & Jose de Sousa & Olivier Lamotte, 2008. "Does international openness affect productivity of local firms? Evidence from Southeastern Europe," LICOS Discussion Papers 21908, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  3. Tomáš Havránek & Zuzana Iršová, 2011. "How to Stir Up FDI Spillovers: Evidence from a Large Meta-Analysis," Working Papers IES 2011/34, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
  4. Jan Hanousek & Evzen Kocenda & Mathilde Maurel, 2010. "Direct and Indirect Effects of FDI in Emerging European Markets: A Survey and Meta-analysis," William Davidson Institute Working Papers Series wp976, William Davidson Institute at the University of Michigan.
  5. Carol Newman & John Rand & Theodore Talbot & Finn Tarp, 2014. "Technology transfers, foreign investment and productivity spillovers: evidence from Vietnam," The Institute for International Integration Studies Discussion Paper Series iiisdp440, IIIS.
  6. Merlevede, Bruno & Schoors, Koen & Spatareanu, Mariana, 2014. "FDI Spillovers and Time since Foreign Entry," World Development, Elsevier, vol. 56(C), pages 108-126.
  7. Bruno Merlevede & Koen Schoors & Mariana Spatareanu, 2010. "FDI Spillovers and the Timing of Foreign Entry," LICOS Discussion Papers 26710, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  8. Suat TEKER & Hayri TUZLA & Aynur PALA, 2014. "Foreign Direct Investments: Asian and European Transition Economies," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 71-82.
  9. Miroslav Sipikal, 2011. "Concentration of FDI and regional disparities - The role of regional policy," ERSA conference papers ersa10p126, European Regional Science Association.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lic:licosd:21808. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.