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To Share or Not To Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?

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Author Info
Beata Javorcik ()
Mariana Spatareanu ()

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Abstract

This study examines whether foreign ownership share in investment projects affects the extent of spillovers from foreign direct investment. The analysis, based on a Romanian firm-level data set produces evidence consistent with positive intra-sectoral spillovers resulting from wholly-owned foreign affiliates but not from projects with joint domestic and foreign ownership. This finding is in line with the literature suggesting that foreign investors tend to put more resources into technology transfer to their wholly-owned projects than to those owned partially. Further, the data indicate that the presence of partially foreign-owned investments is correlated with higher productivity of domestic firms in upstream industries suggesting that domestic suppliers benefit from contacts with multinational customers. The opposite is true, however, in the case of \wholly-owned foreign affiliates. These results are consistent with the observation that foreign investors entering a host country through greenfield projects are less likely to source locally than those engaged in joint ventures or partial acquisitions. They are also in line with the evidence suggesting that wholly-owned foreign subsidiaries use newer or more sophisticated technologies than jointly owned investment projects and thus may have higher requirements vis-à-vis suppliers.

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Paper provided by Department of Economics, Rutgers University, Newark in its series Working Papers Rutgers University, Newark with number 2006-001.

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Length: 27 pages
Date of creation: Feb 2006
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Handle: RePEc:run:wpaper:2006-001

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Related research
Keywords: spillovers; foreign direct investment; joint venture; technology transfer;

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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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. 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 Stephen M. Ross Business School. [Downloadable!]
  2. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
    Other versions:
  3. Mary Hallward-Driemeier & Giuseppe Iarossi & Kenneth L. Sokoloff, 2002. "Exports and Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data," NBER Working Papers 8894, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. John W. Budd & Jozef Konings & Matthew J. Slaughter, . "International Rent Sharing in Multinational Firms," Working Papers 0202, Industrial Relations Center, University of Minnesota (Twin Cities Campus). [Downloadable!]
    Other versions:
  5. 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)
  6. 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. [Downloadable!] (restricted)
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  7. 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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  8. Andres Rodriguez-Clare & Laura Alfaro, 2004. "Multinationals and Linkages: An Empirical Investigation," 2004 Meeting Papers 145, Society for Economic Dynamics. [Downloadable!]
  9. 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. [Downloadable!]
  10. Davide Castellani & Antonello Zanfei, 2001. "Productivity Gaps, Inward Investments and Productivity of European firms," International Trade 0107001, EconWPA. [Downloadable!]
  11. Beata K. Smarzynska & Shang-Jin Wei, 2000. "Corruption and Composition of Foreign Direct Investment: Firm-Level Evidence," NBER Working Papers 7969, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Ramachandran, Vijaya, 1993. "Technology Transfer, Firm Ownership, and Investment in Human Capital," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 664-70, November. [Downloadable!] (restricted)
  13. Belderbos, Rene & Capannelli, Giovanni & Fukao, Kyoji, 2001. "Backward Vertical Linkages of Foreign Manufacturing Affiliates: Evidence from Japanese Multinationals," World Development, Elsevier, vol. 29(1), pages 189-208, January. [Downloadable!] (restricted)
  14. 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. [Downloadable!] (restricted)
  15. Bortolotti, Bernardo & Fantini, Marcella & Siniscalco, Domenico, 2001. "Privatisation Around the World: New Evidence from Panel Data," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  16. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June. [Downloadable!]
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  17. 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. [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. 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. [Downloadable!]
    Other versions:
  2. 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:
  3. Subash Sasidharan, 2006. "Foreign Direct Investment and Technology Spillovers:Evidence from the Indian Manufacturing Sector," Working Papers id:448, esocialsciences.com. [Downloadable!]
    Other versions:
  4. Dawid Herbert & Greiner Alfred & Zou Benteng, 2008. "Optimal Foreign Investment Dynamics in the Presence of Technological Spillovers," CREA Discussion Paper Series 08-07, Center for Research in Economic Analysis, University of Luxembourg. [Downloadable!]
  5. Tondl, Gabriele & Prüfer, Patricia, 2007. "Does it Make a Difference? Comparing Growth Effects of European and North American FDI in Latin America," Proceedings of the German Development Economics Conference, Göttingen 2007 26, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  6. Chang, Sea Jin & Chung, Jaiho & Xu, Dean, 2007. "FDI and Technology Spillovers in China," CEI Working Paper Series 2007-7, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  7. Sun, Sizhong, 2009. "Impact of aggregation on measuring FDI spillovers: a Monte Carlo appraisal," MPRA Paper 15340, University Library of Munich, Germany. [Downloadable!]
  8. Harding, Torfinn & Javorcik, Beata Smarzynska, 2007. "Developing economies and international investors : do investment promotion agencies bring them together ?," Policy Research Working Paper Series 4339, The World Bank. [Downloadable!]
    Other versions:
  9. Steven Poelhekke & Frederick van der Ploeg, 2009. "Growth, Foreign Direct Investment and Urban Concentration: Unbundling Spatial Lags," DNB Working Papers 195, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  10. Sourafel Girma & Yundan Gong & Holger Görg, 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). [Downloadable!]
    Other versions:
  11. Juan Carluccio & Thibault Fally, 2008. "Multinationals, technological incompatibilities and spillovers," PSE Working Papers 2008-63, PSE (Ecole normale supérieure). [Downloadable!]
  12. Marin, Anabel & Sasidharan, Subash, 2008. "The Heterogeneity of MNC' Subsidiaries and Technology Spillovers: Explaining positive and negative effects in emerging economies," UNU-MERIT Working Paper Series 066, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
  13. Nuno Crespo & Maria Paula Fontoura, 2005. "Determinant Factors of FDI Spillovers – What Do We Really Know?," Working Papers 2005/06, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
    Other versions:
  14. Adam Gersl & Ieva Rubene & Tina Zumer, 2007. "Foreign Direct Investment and Productivity Spillovers: Updated Evidence from Central and Eastern Europe," Working Papers 2007/8, Czech National Bank, Research Department. [Downloadable!]
  15. Beata S. Javorcik & Mariana Spatareanu, 2008. "Liquidity Constraints and Linkages with Multinationals," LICOS Discussion Papers 22508, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
    Other versions:
  16. Robert E. Lipsey, 2006. "Measuring the Impacts of FDI in Central and Eastern Europe," NBER Working Papers 12808, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Javorcik, Beata S. & Saggi, Kamal & Spatareanu, Mariana, 2004. "Does it matter where you come from? vertical spillovers from foreign direct investment and the nationality of investors," Policy Research Working Paper Series 3449, The World Bank. [Downloadable!]
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