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

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  • Beata Javorcik

    ()

  • Mariana Spatareanu

    ()

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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Bibliographic Info

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
Date of revision:
Handle: RePEc:run:wpaper:2006-001

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

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