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How and By How Much does Foreign Direct Investment Increase the Productivity of Domestic Firms?


  • Merlevede, Bruno

    (Hogeschool-Universiteit Brussel (HUB), Belgium
    CERISE - Centre for Russian International and Socio-Political and Economic Studies, Ghent University, Ghent, Belgium)

  • Schoors, Koen

    (CERISE - Centre for Russian International and Socio-Political and Economic Studies, Ghent University, Ghent, Belgium
    William Davidson Institute, University of Michigan)


We analyze productivity spillovers from MNC subsidiaries to domestic Romanian companies, both within (horizontal spillovers) and across industries (vertical spillovers). We separate labor market spillovers from other horizontal spillovers and define the supply-backward linkage spillover that runs from foreign investors over domestic suppliers to local users of domestic inputs. In our panel of Romanian firms, labor market effects differ from other horizontal effects, vertical spillovers dominate horizontal spillovers and the newly defined supply-backward spillover is economically and statistically significant. The spillovers studied raise total factor productivity between 20% and 50% in the period 1998-2001, depending on the firm’s initial level of technology.

Suggested Citation

  • Merlevede, Bruno & Schoors, Koen, 2008. "How and By How Much does Foreign Direct Investment Increase the Productivity of Domestic Firms?," Working Papers 2008/39, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  • Handle: RePEc:hub:wpecon:200839

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    Cited by:

    1. Syeda Tamkeen Fatima, 2016. "Productivity spillovers from foreign direct investment: evidence from Turkish micro-level data," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(3), pages 291-324, June.
    2. Klaus E Meyer & Evis Sinani, 2009. "When and where does foreign direct investment generate positive spillovers? A meta-analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(7), pages 1075-1094, September.

    More about this item


    FDI; spillovers; absorptive capability; firm size; ownership structure;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business


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