Foreign Direct Investment, Technology Transfer, and Productivity Growth in Transition Countries Empirical Evidence from Panel Data
AbstractMany governments offer significant inducements to attract inward investment, motivated by the expectation of spillover benefits. Foreign direct investment (FDI) is generally perceived as the best channel for technology transfer, not only across national boundaries but also between firms – in particular, between foreign and domestic companies. This paper tests this hypothesis for five transition countries in Eastern Europe using panel data on more than 8000 plants in the Czech Republic, Poland, Hungary, Romania and Bulgaria. In a log-linear model, the Cobb-Douglas production function is estimated to examine the productivity effect of: (a) foreign ownership in firms, and (b) foreign presence in industries and regions. In the first case, regression coefficients indicate a positive correlation between foreign equity participation and plant productivity. In the second case, the impact of foreign investment on productivity of domestically owned firms turns out to be either negative or insignificant. Thus, the study corroborates the hypothesis that technology is transferred internationally through multinational companies, but provides no evidence of diffusion of technology from foreign to domestic firms. --
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Bibliographic InfoPaper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 26.
Date of creation: 2004
Date of revision:
foreign direct investment; transition; productivity; technology spillovers;
Find related papers by JEL classification:
- P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
- P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F15 - International Economics - - Trade - - - Economic Integration
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