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Does Foreign Direct Investment Lead to Productivity Spillovers? Firm Level Evidence from Indonesia

  • Suyanto
  • Salim, Ruhul A.
  • Bloch, Harry

Summary This paper examines whether spillovers from foreign direct investment (FDI) make any contribution to productivity growth in the Indonesian chemical and pharmaceutical firms using plant-level panel data. The spillover effects from FDI are analyzed using a stochastic frontier approach and productivity growth is decomposed using a generalized Malmquist output-oriented index. The results show positive productivity spillovers from FDI; higher competition is associated with larger spillovers; and domestic firms with R&D gain more spillover benefits compared to those without R&D. FDI spillovers are found to be positive and significant for technological progress and positive, but not significant, for technical and scale efficiency change.

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Article provided by Elsevier in its journal World Development.

Volume (Year): 37 (2009)
Issue (Month): 12 (December)
Pages: 1861-1876

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Handle: RePEc:eee:wdevel:v:37:y:2009:i:12:p:1861-1876
Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

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