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

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  • Sourafel Girma,
  • Holger Görg

Abstract

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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  • 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.
  • Handle: RePEc:iis:dispap:iiisdp01
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    Cited by:

    1. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, World Bank Group, vol. 19(2), pages 171-197.
    2. Della Temenggung, 2007. "Productivity Spillovers from Foreign Direct Investment: Indonesian Manufacturing Industry’s Experience 1975-2000," DEGIT Conference Papers c012_048, DEGIT, Dynamics, Economic Growth, and International Trade.
    3. 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.
    4. Hübler, Michael, 2009. "Avoiding the trap: the dynamic interaction of North-South capital mobility and technology diffusion," Kiel Working Papers 1477, Kiel Institute for the World Economy (IfW).
    5. Mojtaba Bahmani & Nejati Mehdi, 2015. "Trade-based Technology Transfer and Its Impact on the Iranian Economy: Using a CGE Model," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 19(1), pages 107-122, Winter.
    6. Gábor Békés & Jörn Kleinert & Farid Toubal, 2009. "Spillovers from Multinationals to Heterogeneous Domestic Firms: Evidence from Hungary," The World Economy, Wiley Blackwell, vol. 32(10), pages 1408-1433, October.
    7. László Halpern & Balázs Muraközy, 2007. "Does distance matter in spillover?1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(4), pages 781-805, October.
    8. Nuno Crespo & Maria Paula Fontoura & Isabel Proença, 2009. "FDI spillovers at regional level: Evidence from Portugal," Papers in Regional Science, Wiley Blackwell, vol. 88(3), pages 591-607, August.
    9. Minjung Kim, 2013. "Productivity Performance and Exporting Activity of Korean Manufacturing Firms: Quantile Regression Approach," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 19(2), pages 97-120, June.
    10. Richard Harris, 2009. "Spillover and Backward Linkage Effects of FDI: Empirical Evidence for the UK," SERC Discussion Papers 0016, Spatial Economics Research Centre, LSE.
    11. Svetlana Batrakova & Ronald Davies, 2012. "Is there an environmental benefit to being an exporter? Evidence from firm-level data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(3), pages 449-474, September.
    12. Anna Maria Falzoni & Mara Grasseni, 2005. "Home Country Effects of Investing Abroad: Evidence from Quantile Regressions," KITeS Working Papers 170, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jun 2005.
    13. Hübler, Michael & Lontzek, Thomas S., 2009. "The optimal transfer of capital and embodied technologies to developing countries," Kiel Working Papers 1478, Kiel Institute for the World Economy (IfW).
    14. Seda Köymen Özer & Selin Sayek Böke, 2017. "The Characteristics of Domestic Firms: Materializing Productivity Spillovers from FDI," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(11), pages 2562-2584, November.
    15. Zhenghui Li & Hao Dong & Zimei Huang & Pierre Failler, 2019. "Impact of Foreign Direct Investment on Environmental Performance," Sustainability, MDPI, Open Access Journal, vol. 11(13), pages 1-16, June.
    16. B. Merlevede & K. Schoors, 2006. "FDI and the Consequences Towards more complete capture of spillover effects," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/372, Ghent University, Faculty of Economics and Business Administration.
    17. Elif Bascavusoglu-Moreau & Qian Cher Li, 2013. "Knowledge Spillovers & Sources of Knowledge in the Manufacturing Sector: Literature Review & Empirical Evidence for the UK," Working Papers wp451, Centre for Business Research, University of Cambridge.

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    More about this item

    Keywords

    foreign direct investment; absorptive capacity; productivity spillovers; quantile regressions;
    All these keywords.

    JEL classification:

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

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