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Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Investment?

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  • Görg, Holger
  • Greenaway, David

Abstract

Many governments offer significant inducements to attract inward investment, motivated by the expectation of spillover benefits. This paper begins by reviewing possible sources of spillovers. It then provides a comprehensive evaluation of the empirical evidence on productivity, wages and exports spillovers in developing, developed and transitional economies. Although theory can identify a range of possible spillover channels, robust empirical support for positive spillovers is hard to find. The reasons for this are explored and the paper concludes with a review of policy aspects.

Suggested Citation

  • Görg, Holger & Greenaway, David, 2002. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Investment?," CEPR Discussion Papers 3485, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3485
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    1. Sbia, Rashid & Shahbaz, Muhammad & Hamdi, Helmi, 2014. "A contribution of foreign direct investment, clean energy, trade openness, carbon emissions and economic growth to energy demand in UAE," Economic Modelling, Elsevier, vol. 36(C), pages 191-197.
    2. Marcella Nicolini & Laura Resmini, 2006. "The Impact of Mnes on Domestic Firms in CEECS: A Micro-Econometric Approach," ERSA conference papers ersa06p411, European Regional Science Association.
    3. Nigel Driffield & Karl Taylor, 2005. "Are Foreign Firms More Technologically Intensive? Uk Establishment Evidence From The Ard," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(1), pages 38-53, February.
    4. Hansen, Michael W. & Pedersen, Torben & Petersen, Bent, 2009. "MNC strategies and linkage effects in developing countries," Journal of World Business, Elsevier, vol. 44(2), pages 121-130, April.
    5. Karl-Markus Modén & Pehr-Johan Norbäck & Lars Persson, 2008. "Efficiency and Ownership Structure: The Case of Poland," The World Economy, Wiley Blackwell, vol. 31(3), pages 437-460, March.
    6. BEHRENS, Kristian & PICARD, Pierre M., 2005. "Tax competition, location, and horizontal foreign direct investment," CORE Discussion Papers 2005091, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Wolfgang Keller & Stephen R. Yeaple, 2009. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 821-831, November.
    8. Carlo Altomonte & Chiara Bonassi, 2004. "FDI, International Outsourcing and Linkages," KITeS Working Papers 155, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Apr 2004.
    9. Griffith, Rachel & Redding, Stephen J. & Simpson, Helen, 2002. "Productivity Convergence and Foreign Ownership at the Establishment Level," CEPR Discussion Papers 3765, C.E.P.R. Discussion Papers.
    10. Miguel León-Ledesma, 2005. "Exports, Product Differentiation and Knowledge Spillovers," Open Economies Review, Springer, vol. 16(4), pages 363-379, October.
    11. Sourafel Girma, & Holger Görg, 2003. "Foreign direct investmant, spillovers and absorptive capacity: Evidence from quantile regressions," The Institute for International Integration Studies Discussion Paper Series iiisdp01, IIIS.
    12. Sangaralingam Ramesh, 2013. "China’s Transition to a Knowledge Economy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 4(4), pages 473-491, December.
    13. Dimitrios Asteriou & Argiro Moudatsou, 2015. "Business Cycle Synchronization in the Enlarged EU: The Role of Bilateral Trade and FDI," Review of Development Economics, Wiley Blackwell, vol. 19(1), pages 196-207, February.
    14. Rodolphe Desbordes & Julien Vauday, 2007. "The Political Influence Of Foreign Firms In Developing Countries," Economics and Politics, Wiley Blackwell, vol. 19(3), pages 421-451, November.
    15. Kaitila, Ville, 2007. "Free Trade between the EU and Russia - Sectoral Effects and Impacts on Northwest Russia," Discussion Papers 1087, The Research Institute of the Finnish Economy.
    16. Keller, Wolfgang & Yeaple, Stephen R, 2003. "Multinational Enterprises, International Trade and Productivity Growth: Firm-Level Evidence from the US," CEPR Discussion Papers 3805, C.E.P.R. Discussion Papers.

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    Keywords

    foreign direct investment; productivity spillovers; technology transfer;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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