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Foreign direct investmant, spillovers and absorptive capacity: Evidence from quantile regressions

  • Sourafel Girma,
  • Holger Görg

This paper focuses on the role of absorptive capacity in determining whether or notdomestic firms benefit from productivity spillovers from FDI using establishment level data for the UK. We distinguish the effect of FDI in the same sector and region from FDI in the same sector but outside the region. We also allow for different effects of FDI on establishments located at different quantiles of the productivity distribution by using conditional quantile regression. Overall, while there is substantial heterogeneity in results across sectors and quantiles, our findings clearly suggest that both absorptive capacity and distance matter for productivity spillover benefits. We find evidence for a u-shaped relationship between absorptive capacity and productivity spillovers from FDI in the region, while there is an inverted u-shaped relationship for spillovers from FDI outside the region. We also analyse in some detail the impact of changes in absorptive capacity on establishments’ ability to benefit from spillovers.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp01.

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Length: 36 pages
Date of creation: 01 Jul 2003
Date of revision:
Handle: RePEc:iis:dispap:iiisdp01
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