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Foreign Direct Investment And Innovation In Central And Eastern Europe: Evidence From Estonia

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  • Jaan Masso
  • Tõnu Roolaht
  • Urmas Varblane

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 Faculty of Economics and Business Administration, University of Tartu (Estonia) in its series University of Tartu - Faculty of Economics and Business Administration Working Paper Series with number 67.

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Length: 67 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:mtk:febawb:67

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Keywords: innovation; internationalisation; foreign direct investments; catching-up countries;

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Cited by:
  1. Priit Vahter, . "Does FDI spur innovation, productivity and knowledge sourcing by incumbent firms? Evidence from manufacturing industry in Estonia," Discussion Papers 10/09, University of Nottingham, GEP.
  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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