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

Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?

  • Jonathan E. Haskel
  • Sonia C. Pereira
  • Matthew J. Slaughter

Are there productivity spillovers from FDI to domestic firms, and, if so, how much should host countries be willing to pay to attract FDI? To examine these questions we use a plant-level panel covering U.K. manufacturing from 1973 through 1992. Across a wide range of specifications, we estimate a significantly positive correlation between a domestic plant's TFP and the foreign-affiliate share of activity in that plant's industry. This is consistent with positive FDI spillovers. We do not generally find significant effects on plant TFP of the foreign-affiliate share of activity in that plant's region. Typical estimates suggest that a 10 percentage-point increase in foreign presence in a U.K. industry raises the TFP of that industry's domestic plants by about 0.5 percent. We also use these estimates to calculate the per-job value of these spillovers. These calculated values appear to be less than per-job incentives governments have granted in recent high-profile cases, in some cases several times less.

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.nber.org/papers/w8724.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8724.

as
in new window

Length:
Date of creation: Jan 2002
Date of revision:
Publication status: published as 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, 03.
Handle: RePEc:nbr:nberwo:8724
Note: ITI PR
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
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. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  2. 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.
  3. 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.
  4. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  5. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
  6. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June.
  7. Stephen Nickell, 1993. "Competition and Corporate Performance," CEP Discussion Papers dp0182, Centre for Economic Performance, LSE.
  8. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
  9. 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.
  10. Robert E. Baldwin & Robert E. Lipsey & J. David Richards, 1998. "Geography and Ownership as Bases for Economic Accounting," NBER Books, National Bureau of Economic Research, Inc, number bald98-1, December.
  11. Mansfield, Edwin & Romeo, Anthony, 1980. "Technology Transfer to Overseas Subsidiaries by U.S.-Based Firms," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 737-50, December.
  12. Fosfuri, Andrea & Motta, Massimo & Ronde, Thomas, 2001. "Foreign direct investment and spillovers through workers' mobility," Journal of International Economics, Elsevier, vol. 53(1), pages 205-222, February.
  13. Courant, Paul N., 1994. "How Would You Know a Good Economic Policy If You Tripped Over One? Hint: Don't Just Count Jobs," National Tax Journal, National Tax Association, vol. 47(4), pages 863-81, December.
  14. Z, Griliches & Jacques Mairesse, 1997. "Production Functions : The Search for Identification," Working Papers 97-30, Centre de Recherche en Economie et Statistique.
  15. Nina Pavcnik, 2000. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," NBER Working Papers 7852, National Bureau of Economic Research, Inc.
  16. Davis, D.R. & Weinstein, D.E., 1999. "An Account of Global Factor Trade," Working Papers 435, Research Seminar in International Economics, University of Michigan.
  17. Vickers, John, 1995. "Concepts of Competition," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 1-23, January.
  18. Black, Dan A & Hoyt, William H, 1989. "Bidding for Firms," American Economic Review, American Economic Association, vol. 79(5), pages 1249-56, December.
  19. Lipsey, Robert E. & Blomström, Magnus & Ramstetter, Eric, 1995. "Internationalized Production in World Output," SSE/EFI Working Paper Series in Economics and Finance 80, Stockholm School of Economics.
  20. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September.
  21. Driffield, Nigel, 2001. "The Impact of Domestic Productivity of Inward Investment in the UK," Manchester School, University of Manchester, vol. 69(1), pages 103-19, January.
  22. Rachel Griffith, 1999. "Using the ARD establishment level data to look at foreign ownership and productivity in the UK," IFS Working Papers W99/06, Institute for Fiscal Studies.
  23. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Entry, Exit and Establishment Survival in UK Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 91-112, 03.
  24. Girma, Sourafel & Wakelin, Katharine, 2001. "Regional Underdevelopment: Is FDI the Solution? A Semiparametric Analysis," CEPR Discussion Papers 2995, C.E.P.R. Discussion Papers.
  25. Jarle Møen, 2000. "Is Mobility of Technical Personnel a Source of R&D Spillovers?," NBER Working Papers 7834, National Bureau of Economic Research, Inc.
  26. Keller, Wolfgang, 2001. "The geography and channels of diffusion at the world's technology frontier," HWWA Discussion Papers 123, Hamburg Institute of International Economics (HWWA).
  27. Robert E. Baldwin & Robert E. Lipsey & J. David Richardson, 1998. "Introduction to "Geography and Ownership as Bases for Economic Accounting"," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 1-8 National Bureau of Economic Research, Inc.
  28. Blomstrom, Magnus, 1986. "Foreign Investment and Productive Efficiency: The Case of Mexico," Journal of Industrial Economics, Wiley Blackwell, vol. 35(1), pages 97-110, September.
  29. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, June.
  30. Mark E. Doms & J . Bradford Jensen, 1998. "Comparing Wages, Skills, and Productivity between Domestically and Foreign-Owned Manufacturing Establishments in the United States," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 235-258 National Bureau of Economic Research, Inc.
  31. Martin Neil Baily & Robert M. Solow, 2001. "International Productivity Comparisons Built from the Firm Level," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 151-172, Summer.
  32. Aitken, Brian & Harrison, Ann & DEC, 1994. "Do domestic firms benefit from foreign direct investment? Evidence from panel data," Policy Research Working Paper Series 1248, 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:nbr:nberwo:8724. 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.