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Foreign firm characteristics, absorptive capacity and the institutional framework : the role of mediating factors for FDI spillovers in low- and middle-income countries

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  • Farole, Thomas
  • Winkler, Deborah

Abstract

Using a cross-section of more than 25,000 domestic manufacturing firms in 78 low and middle-income countries from the World Bank's Enterprise Surveys, this paper assesses how mediating factors influence intra-industry productivity spillovers to domestic firms from foreign direct investment. It identifies three types of mediating factors: (i) foreign direct investment spillover potential, (ii) domestic firm absorptive capacity, and (iii) the host country's institutional framework. It finds that all three affect the extent and direction of foreign direct investment spillovers on domestic firm productivity. However, the impact of mediating factors depends significantly on the level of domestic firms'productivity and the structure of foreign ownership.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6265.

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Date of creation: 01 Nov 2012
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Handle: RePEc:wbk:wbrwps:6265

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Keywords: Foreign Direct Investment; Microfinance; Emerging Markets; Economic Theory&Research; E-Business;

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Cited by:
  1. JUDE, Cristina & LEVIEUGE, Gregory, 2013. "Growth effect of FDI in developing economies: The role of institutional quality," MPRA Paper 49321, University Library of Munich, Germany.
  2. Vassilis Monastiriotis, 2014. "Origin of FDI and domestic productivity spillovers: does European FDI have a ‘productivity advantage’ in the ENP countries?," Europe in Question Discussion Paper Series of the London School of Economics (LEQs), London School of Economics / European Institute 0, London School of Economics / European Institute.
  3. Cristina Jude & Grégory Levieuge, 2014. "Growth Effect of FDI in Developing Economies: the Role of Institutional Quality," Working Papers, HAL halshs-01014404, HAL.
  4. World Bank, 2014. "Trading Up to High Income : Turkey Country Economic Memorandum," World Bank Other Operational Studies 19320, The World Bank.

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