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The Role Of Foreign Direct Investment In The Firm Selection Process In A Host Country: Evidence From Slovenia

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Author Info
Katja Zajc Kejžar ()
Abstract

This paper examines the role of inward foreign direct investment (FDI) in firm selection processes in the Slovenian manufacturing sector in the 1994-2003 period by assessing the impact of the entry and presence of foreign firms on a domestic firm’s probability of exiting. The results confirm that not only do foreign entrants tend to be above-average productive but they also find it easier to exit (particularly those entering in the form of acquisitions). Further, the least efficient firms are found to experience a drop in their survival probability upon a foreign firm’s entry. In addition, a foreign firm’s entry seems to stimulate the selection process not only within the industry but also through backward linkages in the upstream supplying industries. Regarding the productivity spillover effects from foreign to local firms the results suggest that they mostly operate through vertical linkages rather than within the same industry.

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Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number wp841.

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Date of creation: 01 Sep 2006
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Handle: RePEc:wdi:papers:2006-841

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Keywords: foreign direct investment; firm selection process; crowding out; productivity spillovers; Slovenia;

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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