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Productivity spillovers from FDI and the role of domestic firm’s absorptive capacity in South Korean manufacturing industries

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  • Minjung Kim

Abstract

This paper investigates productivity spillovers from foreign direct investment (FDI) and the absorptive capacity of domestic firms using the firm level data of South Korean manufacturing industries. This paper finds that the absorptive capacity has as a role in mitigating the negative spillovers from FDI by capturing additional positive spillovers from FDI. Thus, firms without any absorptive capacity suffer more from FDI than firms with absorptive capacity. However, when the endogeneity problems in absorptive capacity such as R&D and export activity variables are considered, the role of absorptive capacity becomes too insignificant to alleviate the negative spillovers from FDI. In addition, the results from simultaneous quantile regression indicate that the effect of R&D and export activity to absorb the additional spillovers is heterogeneous depending on the conditional productivity distribution. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Minjung Kim, 2015. "Productivity spillovers from FDI and the role of domestic firm’s absorptive capacity in South Korean manufacturing industries," Empirical Economics, Springer, vol. 48(2), pages 807-827, March.
    • Handle: RePEc:spr:empeco:v:48:y:2015:i:2:p:807-827
    DOI: 10.1007/s00181-014-0804-z
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    Cited by:

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    2. Duan, Yunlong & Liu, Shuling & Cheng, Hao & Chin, Tachia & Luo, Xuan, 2021. "The moderating effect of absorptive capacity on transnational knowledge spillover and the innovation quality of high-tech industries in host countries: Evidence from the Chinese manufacturing industry," International Journal of Production Economics, Elsevier, vol. 233(C).
    3. Mao, Zhenxing (Eddie) & Yang, Yang, 2016. "FDI spillovers in the Chinese hotel industry: The role of geographic regions, star-rating classifications, ownership types, and foreign capital origins," Tourism Management, Elsevier, vol. 54(C), pages 1-12.
    4. Kim, Minjung & Xin, Ding, 2021. "Export spillover from foreign direct investment in China during pre- and post-WTO accession," Journal of Asian Economics, Elsevier, vol. 75(C).
    5. Moralles, Herick Fernando & Moreno, Rosina, 2020. "FDI productivity spillovers and absorptive capacity in Brazilian firms: A threshold regression analysis," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 257-272.
    6. Naijela Janaina Costa Silveira & Diogo Ferraz & Eduardo Polloni‐Silva & Diego Scarpa de Mello & Fernanda Pereira Sartori Falguera & Herick Fernando Moralles, 2022. "Modeling the building blocks of country‐level absorptive capacity: Comparing developed and emergent economies," Bulletin of Economic Research, Wiley Blackwell, vol. 74(3), pages 783-824, July.
    7. Md Arif-Ur-Rahman & Kazuo Inaba, 2021. "Foreign direct investment and productivity spillovers: a firm-level analysis of Bangladesh in comparison with Vietnam," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-23, December.
    8. Mei, Jen-Chung, 2021. "Refining vertical productivity spillovers from FDI: Evidence from 32 economies," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 176-191.
    9. Bo-Young Choi & Ju Hyun Pyun, 2017. "Industry FDI and the Distribution of Plant Productivity: Analysis Using Korean Plant-Level Data," The Developing Economies, Institute of Developing Economies, vol. 55(2), pages 105-129, June.
    10. Luke Emeka Okafor & Mita Bhattacharya & Harry Bloch, 2017. "Imported Intermediates, Absorptive Capacity and Productivity: Evidence from Ghanaian Manufacturing Firms," The World Economy, Wiley Blackwell, vol. 40(2), pages 369-392, February.

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    More about this item

    Keywords

    Foreign direct investment (FDI); Productivity spillovers; Absorptive capacity; Simultaneous quantile regression; F2; O1; O3;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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