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Testing for Marginal Spillovers from Foreign Direct Investment

Author

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  • Carlo Altomonte

    (Bocconi University, Milan)

  • Enrico Pennings

    (Erasmus University Rotterdam)

Abstract

We develop a simple test to assess whether horizontal spillover effects from multinational to domestic firms are endogenous to the market structure generated by the entry of the same multinationals. In particular, we analyze the performance of a panel of 10,650 domestic and multinational firms operating in Romania in the period 1995-2001. Controlling for the simultaneity bias in productivity estimates through semi-parametric techniques, we find that changes in domestic firms’ TFP are positively related to the first foreign investment in a specific industry and region, but get significantly weaker and become negative as the number of multinationals that enter in the considered industry/region increases. We can thus recover evidence of changing marginal effects in domestic firms’ TFP, the sign of which depends on a specific threshold in the presence of foreign firms.

Suggested Citation

  • Carlo Altomonte & Enrico Pennings, 2005. "Testing for Marginal Spillovers from Foreign Direct Investment," Tinbergen Institute Discussion Papers 05-101/4, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20050101
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    Cited by:

    1. Constantin Anghelache & Alexandru Manole & Madalina-Gabriela Anghel & Emilia Stanciu & Alexandru Ursache, 2017. "Some Significant Macroeconomic Evolutions at the End of 2016," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(1), pages 213-224, January.
    2. Miklos Szanyi & Ichiro Iwasaki & Peter Csizmadia & Miklos Illessy & Csaba Mako, 2009. "The concentric-circle model of FDI spilklover effects estimation using Hungarian panel data," IWE Working Papers 191, Institute for World Economics - Centre for Economic and Regional Studies.
    3. Matija Rojec & Mark Knell, 2018. "Why Is There A Lack Of Evidence On Knowledge Spillovers From Foreign Direct Investment?," Journal of Economic Surveys, Wiley Blackwell, vol. 32(3), pages 579-612, July.
    4. Alexandru MANOLE & Constantin ANGHELACHE & Ihab Jweida SJ JWEIDA & Georgiana NITA & Andreea Ioana MARINESCU, 2016. "Regression model used to analyse the correlation between GDP and export activities," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(10), pages 89-92, October.

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    More about this item

    Keywords

    Multinational firms; productivity; transition economies;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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