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Is the effect really so large? Firm‐level evidence on the role of FDI in a transition economy-super-1

  • Jan Hagemejer
  • Joanna Tyrowicz

Literature is not clear on the effect of FDI on the economic performance in hosting countries. The analysed effects include productivity, propensity to export, access to financial markets, etc. Although foreign subsidiaries usually perform better than the average of the hosting economies, sometimes the selection effect is found to be considerable. In this paper we use a unique dataset based on accounting annual reports to the statistical authorities by all medium and large Polish enterprises over a period 1997-2006. We apply a propensity score matching technique to disentangle the effect of self-selection and FDI entry (treatment). We also distinguish explicitly between foreign ownership and privatisation through a foreign investor. We find strong support of the view that foreign ownership increases access to financing. Evidence suggests also that although FDI enters more frequently companies who already participate in the international trading networks, 20% of the export intensity may be consistently attributed to the treatment effect. On the other hand, we were not able to confirm large effects on efficiency, nor in the case of rentability, while the sizes of the effects are different for greenfield and private acquisitions as opposed to privatisation.

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File URL: http://hdl.handle.net/10.1111/j.1468-0351.2012.00433.x
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Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 20 (2012)
Issue (Month): 2 (04)
Pages: 195-233

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Handle: RePEc:bla:etrans:v:20:y:2012:i:2:p:195-233
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  16. Zilibotti, Fabrizio & Redding, Stephen & Burgess, Robin & Aghion, Philippe, 2005. "Entry Liberalization and Inequality in Industrial Performance," Scholarly Articles 4481508, Harvard University Department of Economics.
  17. Denisova, Irina & Eller, Markus & Frye, Timothy & Zhuravskaya, Ekaterina, 2009. "Who Wants To Revise Privatization? The Complementarity of Market Skills and Institutions," CEPR Discussion Papers 7260, C.E.P.R. Discussion Papers.
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