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FDI Spillovers and Time since Foreign Entry

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  • Merlevede, Bruno
  • Schoors, Koen
  • Spatareanu, Mariana

Abstract

This study investigates the effect of foreign direct investment (FDI) on the productivity of local firms. In contrast to existing literature our empirical approach does not require FDI to have immediate or permanent effects. We find that foreign entry initially negatively affects local competitors’ productivity, followed by a positive permanent effect from majority foreign owned firms present for longer time. The effect on the productivity of local suppliers, in contrast, is transient. Majority foreign owned firms boost local suppliers’ productivity a few years after entry, then the effect fades out. Minority foreign owned firms have similar but smaller effect.

Suggested Citation

  • Merlevede, Bruno & Schoors, Koen & Spatareanu, Mariana, 2014. "FDI Spillovers and Time since Foreign Entry," World Development, Elsevier, vol. 56(C), pages 108-126.
  • Handle: RePEc:eee:wdevel:v:56:y:2014:i:c:p:108-126
    DOI: 10.1016/j.worlddev.2013.10.022
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    Cited by:

    1. Bruno Merlevede & Victoria Purice, 2014. "Distance, Time since Foreign Entry, and Knowledge Spillovers from Foreign Direct Investment," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/896, Ghent University, Faculty of Economics and Business Administration.
    2. L. Pérez-Villar & A. Seric, 2015. "Multinationals in Sub-Saharan Africa: Domestic linkages and institutional distance," International Economics, CEPII research center, issue 142, pages 94-117.
    3. Damijan, Jože & Kostevc, Črt & Marek, Philipp & Rojec, Matija, 2015. "Do Manufacturing Firms Benefit from Services FDI? – Evidence from Six New EU Member States," IWH Discussion Papers 5/2015, Halle Institute for Economic Research (IWH).
    4. repec:kap:jinten:v:15:y:2017:i:4:d:10.1007_s10843-017-0205-4 is not listed on IDEAS
    5. Thomas Jobert & Fatih Karanfil & Anna Tykhonenko, 2015. "Trade and Environment: Further Empirical Evidence from Heterogeneous Panels Using Aggregate Data," GREDEG Working Papers 2015-31, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    6. repec:eee:iburev:v:27:y:2018:i:4:p:777-796 is not listed on IDEAS
    7. Miao Wang & M. C. Sunny Wong, 2016. "Effects of Foreign Direct Investment on Firm-level Technical Efficiency: Stochastic Frontier Model Evidence from Chinese Manufacturing Firms," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 335-361, September.
    8. Bruno Merlevede & Matthijs De Zwaan & Karolien Lenaerts & Victoria Purice, 2015. "Multinational Networks, Domestic,and Foreign Firms in Europe," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 15/900, Ghent University, Faculty of Economics and Business Administration.
    9. repec:spr:weltar:v:154:y:2018:i:2:d:10.1007_s10290-017-0298-9 is not listed on IDEAS
    10. Mico Apostolov, 2016. "Cobb–Douglas production function on FDI in Southeast Europe," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 5(1), pages 1-28, December.
    11. Ha, Yoo Jung & Giroud, Axèle, 2015. "Competence-creating subsidiaries and FDI technology spillovers," International Business Review, Elsevier, vol. 24(4), pages 605-614.
    12. Karolien Lenaerts & Bruno Merlevede, 2016. "Supply chain fragmentation, input--output tables and spillovers from foreign direct investment," Economic Systems Research, Taylor & Francis Journals, vol. 28(3), pages 315-332, September.
    13. K. Lenaerts & B. Merlevede, 2014. "FDI Spillovers and Multinational Firm Heterogeneity," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/879, Ghent University, Faculty of Economics and Business Administration.
    14. Philipp Harms & Pierre-Guillaume Méon, 2014. "Good and bad FDI: The growth effects of greenfield investment and mergers and acquisitions in developing countries," Working Papers CEB 14-021, ULB -- Universite Libre de Bruxelles.
    15. Lin, Mi & Kwan, Yum K., 2016. "FDI technology spillovers, geography, and spatial diffusion," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 257-274.
    16. Karolien Lenaerts & Bruno Merlevede, 2015. "Firm size and spillover effects from foreign direct investment: the case of Romania," Small Business Economics, Springer, vol. 45(3), pages 595-611, October.
    17. repec:bla:presci:v:95:y:2016:i:4:p:775-800 is not listed on IDEAS
    18. Alina Taran & Marilena Mironiuc & Maria-Carmen Huian, 2016. "Examining The Influence Of Some Macroeconomic Factors On Foreign Direct Investments," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 18, pages 159-182, December.
    19. Charlie Joyez, 2018. "Interaction between firm-level and host-country characteristics and multinationals' integration choices," Working Papers DT/2018/03, DIAL (Développement, Institutions et Mondialisation).
    20. Naveen Rai & Lena Suchanek & Maria Bernier, 2018. "Does Outward Foreign Investment Matter for Canadian Productivity? Evidence from Greenfield Investments," Staff Working Papers 18-31, Bank of Canada.

    More about this item

    Keywords

    FDI; spillovers; dynamics; timing;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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