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

Listed author(s):
  • 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.

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Paper provided by Hogeschool-Universiteit Brussel, Faculteit Economie en Management in its series Working Papers with number 2008/39.

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Length: 34 pages
Date of creation: Sep 2008
Handle: RePEc:hub:wpecon:200839
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