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When Does FDI Have Positive Spillovers? Evidence from 17 Transition Market Economies

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  • Gorodnichenko, Yuriy
  • Svejnar, Jan
  • Terrell, Katherine

Abstract

We use rich firm-level data and national input-output tables from 17 countries over the 2002-2005 period to test new and existing hypotheses about the impact of foreign direct investment (FDI) on the efficiency of domestic firms in the host country (i.e., spillovers). We document that backward linkages have a consistently positive effect on productivity of domestic firms while horizontal and forward linkages show no consistent effect. We also examine how the strength of spillovers varies by sector, FDI source, business environment (corruption, red tape, level of development), firm’s distance to the technological frontier, education of workers, and other firm- and country-specific characteristics.

Suggested Citation

  • Gorodnichenko, Yuriy & Svejnar, Jan & Terrell, Katherine, 2014. "When Does FDI Have Positive Spillovers? Evidence from 17 Transition Market Economies," CEPR Discussion Papers 9807, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9807
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    6. Ronald B. Davies & Michael J. Lamla & Marc Schiffbauer, 2016. "Learning or Leaning: Persistent and Transitory Spillovers from FDI," Working Papers 201601, School of Economics, University College Dublin.
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    10. Cozza, Claudio & Perani, Giulio & Zanfei, Antonello, 2016. "Are multinationals better at creating technical linkages with local firms?," Papers in Innovation Studies 2016/14, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    11. Hagemejer, Jan & Svejnar, Jan & Tyrowicz, Joanna, 2018. "Are Rushed Privatizations Substandard? Analyzing Firm-level Privatization under Fiscal Pressure," CEPR Discussion Papers 12991, C.E.P.R. Discussion Papers.
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    18. Davies,Ronald B. & Lamla,Michael Josef & Schiffbauer,Marc Tobias, 2016. "Learning or leaning : persistent and transitory growth spillovers from FDI," Policy Research Working Paper Series 7591, The World Bank.
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    21. Wadim STRIELKOWSKI & Inna ČÁBELKOVÁ, 2016. "Barriers to Entry and Economic Growth in Transition Economies," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(2), pages 41-58.
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    More about this item

    Keywords

    efficiency; FDI; spillovers; transition economies;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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