IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Impact of Firm Heterogeneity on Direct and Spillover Effects of FDI: Micro Evidence from Ten Transition Countries

  • Joze P. Damijan
  • Matija Rojec
  • Boris Majcen
  • Mark Knell

This paper presents a comparative study of the importance of direct technology transfer and spillovers through FDI on a set of ten transition countries, using a common methodology and appropriate methods to account for selection and simultaneity correction. This paper considers by far the largest firm level dataset (more than 90,000 firms) used by any study on the spillover effects of FDI. The main novelty of the paper is the explicit control for various sources of firm heterogeneity when accounting for different effects of FDI on firm performance. Controlling for these variables leads to some interesting results which contrast with the previous empirical work in the field. We find that horizontal spillovers have become increasingly important over the last decade, and they may even become more important than vertical spillovers. Furthermore, this work shows that the heterogeneity of firms in terms of absorptive capacity, size, productivity and technology levels affect the results. These findings suggest that both direct effects from foreign ownership as well as the spillovers from foreign firms substantially depend on the absorptive capacity and productivity level of individual firms. Only more productive firms and firms with higher absorptive capacities are able to both compete with foreign affiliates in the same sector and benefit from the increased upstream demand for intermediates generated by foreign affiliates. In addition, these results show that foreign presence may also affect smaller firms to a larger extent than larger firms, but this impact may be in either direction.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp218.pdf
Download Restriction: no

Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 21808.

as
in new window

Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:lic:licosd:21808
Contact details of provider: Postal:
De Bériotstraat 34, B-3000 Leuven

Phone: +32 (0) 16 / 32 6598
Fax: +32 (0) 16 / 32 6599
Web page: http://www.econ.kuleuven.be/licos
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 3-61.
  2. Marcella Nicolini & Laura Resmini, 2006. "The Impact of Mnes on Domestic Firms in CEECS: A Micro-Econometric Approach," ERSA conference papers ersa06p411, European Regional Science Association.
  3. Wolfgang Keller & Stephen R. Yeaple, 2009. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 821-831, November.
  4. Djankov, Simeon & Hoekman, Bernard M, 2000. "Foreign Investment and Productivity Growth in Czech Enterprises," World Bank Economic Review, World Bank Group, vol. 14(1), pages 49-64, January.
  5. Ethier, Wilfred, 1979. "Internationally decreasing costs and world trade," Journal of International Economics, Elsevier, vol. 9(1), pages 1-24, February.
  6. Adam Jaffe & Manuel Trajtenberg, 1999. "International Knowledge Flows: Evidence From Patent Citations," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 8(1-2), pages 105-136.
  7. Lee Branstetter, 2000. "Is Foreign Direct Investment a Channel of Knowledge Spillovers? Evidence from Japan's FDI in the United States," NBER Working Papers 8015, National Bureau of Economic Research, Inc.
  8. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Scholarly Articles 3445092, Harvard University Department of Economics.
  9. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "Learning-by-Exporting" Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco," NBER Working Papers 5715, National Bureau of Economic Research, Inc.
  10. Blomstrom, Magnus & Wolff, E.N., 1989. "Multinational Corporations And Productivity Convergence In Mexico," Working Papers 89-28, C.V. Starr Center for Applied Economics, New York University.
  11. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
  12. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Chapters, in: Resource and Output Trends in the United States Since 1870, pages 1-23 National Bureau of Economic Research, Inc.
  13. Molly Lesher & Sébastien Miroudot, 2008. "FDI Spillovers and their Interrelationships with Trade," OECD Trade Policy Papers 80, OECD Publishing.
  14. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
  15. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
  16. Baumol, William J. & Nelson, Richard R. & Wolff, Edward N. (ed.), 1994. "Convergence of Productivity: Cross-National Studies and Historical Evidence," OUP Catalogue, Oxford University Press, number 9780195083903, May.
  17. John Cantwell, 1987. "The Reorganization of European Industries After Integration: Selected Evidence on the Role of Multinational Enterprise Activities," Journal of Common Market Studies, Wiley Blackwell, vol. 26(2), pages 127-151, December.
  18. Kugler, Maurice, 2006. "Spillovers from foreign direct investment: Within or between industries?," Journal of Development Economics, Elsevier, vol. 80(2), pages 444-477, August.
  19. Jens Matthias Arnold & Beata Smarzynska Javorcik, 2005. "Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia," Development Working Papers 197, Centro Studi Luca d'Agliano, University of Milano.
  20. Görg, Holger & Greenaway, David, 2003. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," IZA Discussion Papers 944, Institute for the Study of Labor (IZA).
  21. Audretsch, David B, 1998. "Agglomeration and the Location of Innovative Activity," CEPR Discussion Papers 1974, C.E.P.R. Discussion Papers.
  22. Lee Branstetter, 1996. "Are Knowledge Spillovers International or Intranational in Scope? Microeconometric Evidence from the Japan and the United States," NBER Working Papers 5800, National Bureau of Economic Research, Inc.
  23. Irina Tytell & Ksenia Yudaeva, 2005. "The Role of FDI in Eastern Europe and New Independent States: New Channels for the Spillover Effect," Working Papers w0060, Center for Economic and Financial Research (CEFIR).
  24. Keller, W., 1997. "Trade and the Transmission of Technology," Working papers 9620r, Wisconsin Madison - Social Systems.
  25. Gorodnichenko, Yuriy & Svejnar, Jan & Terrell, Katherine, 2007. "When Does FDI Have Positive Spillovers? Evidence from 17 Emerging Market Economies," CEPR Discussion Papers 6546, C.E.P.R. Discussion Papers.
  26. Yuko Kinoshita, 2000. "R&D and technology spillovers via FDI: Innovation and absorptive capacity," CERGE-EI Working Papers wp163, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  27. Glass, Amy Jocelyn & Saggi, Kamal, 1998. "International technology transfer and the technology gap," Journal of Development Economics, Elsevier, vol. 55(2), pages 369-398, April.
  28. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2007. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 482-496, August.
  29. Damijan, Joze P. & Knell, Mark & Majcen, Boris & Rojec, Matija, 2003. "The role of FDI, R&D accumulation and trade in transferring technology to transition countries: evidence from firm panel data for eight transition countries," Economic Systems, Elsevier, vol. 27(2), pages 189-204, June.
  30. Wolfgang Keller, 1997. "Are International R&D Spillovers Trade-Related? Analyzing Spillovers Among Randomly Matched Trade Partners," NBER Working Papers 6065, National Bureau of Economic Research, Inc.
  31. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  32. Barrios Cobos, Salvador & Görg, Holger & Strobl, Eric, 2009. "Spillovers through backward linkages from multinationals: measurement matters!," Kiel Working Papers 1560, Kiel Institute for the World Economy (IfW).
  33. Feenstra, Robert C & Markusen, James R, 1994. "Accounting for Growth with New Inputs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 429-47, May.
  34. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
  35. Tomas Havranek & Zuzana Irsova, 2010. "Which Foreigners Are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI," Working Papers 2010/03, Czech National Bank, Research Department.
  36. Bernstein, Jeffrey I. & Mohnen, Pierre, 1998. "International R&D spillovers between U.S. and Japanese R&D intensive sectors," Journal of International Economics, Elsevier, vol. 44(2), pages 315-338, April.
  37. Beata K. Smarzynska, 2003. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages," William Davidson Institute Working Papers Series 548, William Davidson Institute at the University of Michigan.
  38. Sourafel Girma & David Greenaway & Katharine Wakelin, 2013. "Who Benefits from Foreign Direct Investment in the UK?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(5), pages 560-574, November.
  39. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
  40. Blomstrom, Magnus & Sjoholm, Fredrik, 1999. "Technology transfer and spillovers: Does local participation with multinationals matter?1," European Economic Review, Elsevier, vol. 43(4-6), pages 915-923, April.
  41. Filip Abraham & Jozef Konings & Veerle Slootmaekers, 2010. "FDI spillovers in the Chinese manufacturing sector," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 18(1), pages 143-182, 01.
  42. Mombert Hoppe, 2005. "Technology Transfer Through Trade," Working Papers 2005.19, Fondazione Eni Enrico Mattei.
  43. Susanto Basu & John G. Fernald, 1995. "Aggregate Productivity and the Productivity of Aggregates," NBER Working Papers 5382, National Bureau of Economic Research, Inc.
  44. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  45. Kugler, Maurice, 2000. "The diffusion of externalities from foreign direct investment: theory ahead of measurement," Discussion Paper Series In Economics And Econometrics 0023, Economics Division, School of Social Sciences, University of Southampton.
  46. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  47. Magnus Blomström & Ari Kokko & Mario Zejan, 1994. "Host country competition, labor skills, and technology transfer by multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(3), pages 521-533, September.
  48. Sjöholm, Fredrik, 1998. "Productivity Growth in Indonesia: The Role of Regional Characteristics and Direct Foreign Investment," SSE/EFI Working Paper Series in Economics and Finance 216, Stockholm School of Economics.
  49. Veugelers, Reinhilde & Cassiman, Bruno, 1999. "Make and buy in innovation strategies: evidence from Belgian manufacturing firms," Research Policy, Elsevier, vol. 28(1), pages 63-80, January.
  50. Gábor Békés & Jörn Kleinert & Farid Toubal, 2009. "Spillovers from Multinationals to Heterogeneous Domestic Firms: Evidence from Hungary," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00641328, HAL.
  51. Girma, Sourafel & Görg, Holger, 2006. "Multinationals' Productivity Advantage: Scale or Technology," CEPR Discussion Papers 5841, C.E.P.R. Discussion Papers.
  52. Eaton, Jonathan & Kortum, Samuel, 1996. "Trade in ideas Patenting and productivity in the OECD," Journal of International Economics, Elsevier, vol. 40(3-4), pages 251-278, May.
  53. Renáta Kosová, 2010. "Do Foreign Firms Crowd Out Domestic Firms? Evidence from the Czech Republic," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 861-881, November.
  54. Ben Hamida, Lamia & Gugler, Philippe, 2009. "Are there demonstration-related spillovers from FDI?: Evidence from Switzerland," International Business Review, Elsevier, vol. 18(5), pages 494-508, October.
  55. Arnold, Jens & Javorcik, Beata S. & Mattoo, Aaditya, 2007. "Does services liberalization benefit manufacturing firms ? Evidence from the Czech Republic," Policy Research Working Paper Series 4109, The World Bank.
  56. Joze P. Damijan & Mark Knell & Boris Majcen & Matija Rojec, 2003. "Technology Transfer through FDI in Top-10 Transition Countries: How Important are Direct Effects, Horizontal and Vertical Spillovers?," William Davidson Institute Working Papers Series 549, William Davidson Institute at the University of Michigan.
  57. Harrison, Ann, 1995. "Determinants and effects of direct foreign investment in Cote d'Ivoire, Morocco, and Venezuela," MPRA Paper 36594, University Library of Munich, Germany.
  58. Fernandes, Ana M. & Paunov, Caroline, 2012. "Foreign direct investment in services and manufacturing productivity: Evidence for Chile," Journal of Development Economics, Elsevier, vol. 97(2), pages 305-321.
  59. László Halpern & Balázs Muraközy, 2007. "Does distance matter in spillover?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15, pages 781-805, October.
  60. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  61. Nina Pavcnik, 2000. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," NBER Working Papers 7852, National Bureau of Economic Research, Inc.
  62. Rossitza B. Wooster & David S. Diebel, 2010. "Productivity Spillovers from Foreign Direct Investment in Developing Countries: A Meta-Regression Analysis," Review of Development Economics, Wiley Blackwell, vol. 14(s1), pages 640-655, 08.
  63. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  64. Edwin Mansfield & Anthony Romeo, 1980. "Technology Transfer to Overseas Subsidiaries by U. S.-Based Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 95(4), pages 737-750.
  65. Davide Castellani & Antonello Zanfei, 2007. "Multinational companies and productivity spillovers: is there a specification error?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1047-1051.
  66. Blomström, Magnus & Globerman, Steve & Kokko, Ari, 2000. "The Determinants of Host Country Spillovers from Foreign Direct Investment," CEPR Discussion Papers 2350, C.E.P.R. Discussion Papers.
  67. Marcella Nicolini & Laura Resmini, 2010. "FDI spillovers in new EU member states," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 18(3), pages 487-511, 07.
  68. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
  69. Z, Griliches & Jacques Mairesse, 1997. "Production Functions : The Search for Identification," Working Papers 97-30, Centre de Recherche en Economie et Statistique.
  70. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1.
  71. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
  72. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
  73. Ewe-Ghee Lim, 2001. "Determinants of, and the Relation Between, Foreign Direct Investment and Growth; A Summary of the Recent Literature," IMF Working Papers 01/175, International Monetary Fund.
  74. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  75. Davide Castellani & Antonello Zanfei, 2003. "Technology gaps, absorptive capacity and the impact of inward investments on productivity of European firms ," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(6), pages 555-576.
  76. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, vol. 111(475), pages F723-39, November.
  77. De Loecker, Jan, 2007. "Do exports generate higher productivity? Evidence from Slovenia," Journal of International Economics, Elsevier, vol. 73(1), pages 69-98, September.
  78. Zvi Griliches, 1991. "The Search for R&D Spillovers," NBER Working Papers 3768, National Bureau of Economic Research, Inc.
  79. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February.
  80. Girma, Sourafel & Gong, Yundan & Görg, Holger, 2006. "Can You Teach Old Dragons New Tricks? FDI and Innovation Activity in Chinese State-Owned Enterprises," IZA Discussion Papers 2267, Institute for the Study of Labor (IZA).
  81. James R. Markusen & James R. Melvin, 1981. "Trade, Factor Prices, and the Gains from Trade with Increasing Returns to Scale," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 450-69, August.
  82. Ronald Findlay, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, Oxford University Press, vol. 92(1), pages 1-16.
  83. Nigel Driffield & Max Munday & Annette Roberts, 2002. "Foreign Direct Investment, Transactions Linkages, and the Performance of the Domestic Sector," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 335-351.
  84. Yuko Kinoshita, 2000. "R&D and Technology Spillovers via FDI: Innovation and Absorptive Capacity," William Davidson Institute Working Papers Series 349, William Davidson Institute at the University of Michigan.
  85. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  86. Hoekman, Bernard & Mattoo, Aaditya, 2008. "Services trade and growth," Policy Research Working Paper Series 4461, The World Bank.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:lic:licosd:21808. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.