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Does Foreign Entry Spur Innovation?

Author

Listed:
  • Gorodnichenko, Yuriy

    () (University of California, Berkeley)

  • Svejnar, Jan

    () (Columbia University)

  • Terrell, Katherine

    (University of Michigan)

Abstract

Our estimates, based on large firm-level and industry-level data sets from eighteen countries, suggest that FDI and trade have strong positive spillover effects on product and technology innovation by domestic firms in emerging markets. The FDI effect is more pronounced for firms from advanced economies. Moreover, our results indicate that the spillover effects can be detected with micro data at the firm-level, but that using linkage variables computed from input-output tables at the industry level yields much weaker, and usually insignificant, estimated effects. These patterns are consistent with spillover effects being rather proximate and localized.

Suggested Citation

  • Gorodnichenko, Yuriy & Svejnar, Jan & Terrell, Katherine, 2015. "Does Foreign Entry Spur Innovation?," IZA Discussion Papers 9259, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9259
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    Cited by:

    1. Franco, Chiara & Sanfilippo, Marco & Seric, Adnan, 2015. "What makes linkages "good" linkages? Firms, the investment climate and business support services in Vietnam," IOB Working Papers 2015.09, Universiteit Antwerpen, Institute of Development Policy (IOB).

    More about this item

    Keywords

    innovation; FDI; spillovers; horizontal and vertical linkages; emerging markets; foreign competition;

    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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