IDEAS home Printed from https://ideas.repec.org/p/run/wpaper/2006-001.html
   My bibliography  Save this paper

To Share or Not To Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?

Author

Listed:
  • Beata Javorcik

    ()

  • Mariana Spatareanu

    ()

Abstract

This study examines whether foreign ownership share in investment projects affects the extent of spillovers from foreign direct investment. The analysis, based on a Romanian firm-level data set produces evidence consistent with positive intra-sectoral spillovers resulting from wholly-owned foreign affiliates but not from projects with joint domestic and foreign ownership. This finding is in line with the literature suggesting that foreign investors tend to put more resources into technology transfer to their wholly-owned projects than to those owned partially. Further, the data indicate that the presence of partially foreign-owned investments is correlated with higher productivity of domestic firms in upstream industries suggesting that domestic suppliers benefit from contacts with multinational customers. The opposite is true, however, in the case of \wholly-owned foreign affiliates. These results are consistent with the observation that foreign investors entering a host country through greenfield projects are less likely to source locally than those engaged in joint ventures or partial acquisitions. They are also in line with the evidence suggesting that wholly-owned foreign subsidiaries use newer or more sophisticated technologies than jointly owned investment projects and thus may have higher requirements vis-à-vis suppliers.

Suggested Citation

  • Beata Javorcik & Mariana Spatareanu, 2006. "To Share or Not To Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?," Working Papers Rutgers University, Newark 2006-001, Department of Economics, Rutgers University, Newark.
  • Handle: RePEc:run:wpaper:2006-001
    as

    Download full text from publisher

    File URL: http://www.ncas.rutgers.edu/workingpaper20061
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    3. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
    4. Ramachandran, Vijaya, 1993. "Technology Transfer, Firm Ownership, and Investment in Human Capital," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 664-670, November.
    5. 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.
    6. Smarzynska Javorcik, Beata, 2004. "The composition of foreign direct investment and protection of intellectual property rights: Evidence from transition economies," European Economic Review, Elsevier, vol. 48(1), pages 39-62, February.
    7. 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.
    8. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    9. 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.
    10. John W. Budd & Jozef Konings & Matthew J. Slaughter, "undated". "International Rent Sharing in Multinational Firms," Working Papers 0202, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
    11. Bernardo Bortolotti & Marcella Fantini & Domenico Siniscalco, 2001. "Privatisation Around the World: New Evidence from Panel Data," CESifo Working Paper Series 600, CESifo Group Munich.
    12. 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.
    13. repec:taf:jdevst:v:32:y:1996:i:4:p:602-611 is not listed on IDEAS
    14. Elizabeth Asiedu & Hadi Salehi Esfahani, 2001. "Ownership Structure In Foreign Direct Investment Projects," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 647-662, November.
    15. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
    16. Laura Alfaro & Andrés Rodriguez-Clare, 2004. "Multinationals and Linkages: An Empirical Investigation," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Spring 20), pages 113-169, January.
    17. Mary Hallward-Driemeier & Giuseppe Iarossi & Kenneth L. Sokoloff, 2002. "Exports and Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data," NBER Working Papers 8894, National Bureau of Economic Research, Inc.
    18. Arnold, Jens & Javorcik, Beata & Mattoo, Aaditya, 2006. "Does Services Liberalization Benefit Manufacturing Firms?," CEPR Discussion Papers 5902, C.E.P.R. Discussion Papers.
    19. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "The costs of shared ownership: Evidence from international joint ventures," Journal of Financial Economics, Elsevier, vol. 73(2), pages 323-374, August.
    20. Dimelis, Sophia & Louri-Dendrinou, Eleni, 2001. "Foreign Direct Investment and Efficiency Benefits: A Conditional Quantile Analysis," CEPR Discussion Papers 2868, C.E.P.R. Discussion Papers.
    21. 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.
    22. Belderbos, Rene & Capannelli, Giovanni & Fukao, Kyoji, 2001. "Backward Vertical Linkages of Foreign Manufacturing Affiliates: Evidence from Japanese Multinationals," World Development, Elsevier, vol. 29(1), pages 189-208, January.
    23. Beata K. Smarzynska & Shang-Jin Wei, 2000. "Corruption and Composition of Foreign Direct Investment: Firm-Level Evidence," NBER Working Papers 7969, National Bureau of Economic Research, Inc.
    24. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
    25. Blalock, Garrick & Gertler, Paul J., 2009. "How firm capabilities affect who benefits from foreign technology," Journal of Development Economics, Elsevier, vol. 90(2), pages 192-199, November.
    26. Djankov, Simeon & Hoekman, Bernard, 1997. "Competition Law in Post-Central Planning Bulgaria," CEPR Discussion Papers 1723, C.E.P.R. Discussion Papers.
    27. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
    28. 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.
    29. Davide Castellani & Antonello Zanfei, 2001. "Productivity Gaps, Inward Investments and Productivity of European firms," International Trade 0107001, EconWPA.
    30. 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.
    31. 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.
    32. Jozef Konings, 2001. "The effects of foreign direct investment on domestic firms," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(3), pages 619-633, November.
    33. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    spillovers; foreign direct investment; joint venture; technology transfer;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:run:wpaper:2006-001. 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: (Vlad Manole). General contact details of provider: http://edirc.repec.org/data/edrutus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.