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Foreign firm characteristics, absorptive capacity and the institutional framework : the role of mediating factors for FDI spillovers in low- and middle-income countries

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Listed author(s):
  • Farole, Thomas
  • Winkler, Deborah

Abstract

Using a cross-section of more than 25,000 domestic manufacturing firms in 78 low and middle-income countries from the World Bank's Enterprise Surveys, this paper assesses how mediating factors influence intra-industry productivity spillovers to domestic firms from foreign direct investment. It identifies three types of mediating factors: (i) foreign direct investment spillover potential, (ii) domestic firm absorptive capacity, and (iii) the host country's institutional framework. It finds that all three affect the extent and direction of foreign direct investment spillovers on domestic firm productivity. However, the impact of mediating factors depends significantly on the level of domestic firms'productivity and the structure of foreign ownership.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6265.

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Date of creation: 01 Nov 2012
Handle: RePEc:wbk:wbrwps:6265
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Keywords: Foreign Direct Investment; Microfinance; Emerging Markets; Economic Theory&Research; E-Business;

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Cited by:

  1. Vassilis Monastiriotis, 2014. "Origin of FDI and domestic productivity spillovers: does European FDI have a 'productivity advantage' in the ENP countries?," LSE Research Online Documents on Economics 55267, London School of Economics and Political Science, LSE Library.
  2. World Bank, 2014. "Trading Up to High Income : Turkey Country Economic Memorandum," World Bank Other Operational Studies 19320, The World Bank.
  3. Cristina JUDE & Grégory LEVIEUGE, 2013. "Growth Effect of FDI in Developing Economies: the Role of Institutional Quality," LEO Working Papers / DR LEO 2251, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
  4. Sanchez-Martin, Miguel Eduardo & de Pinies, Jaime & Antoine, Kassia, 2015. "Measuring the determinants of backward linkages from FDI in developing economies : is it a matter of size ?," Policy Research Working Paper Series 7185, The World Bank.
  5. Zhan QU & Horst Raff & Nicolas Schmitt, 2015. "Knowledge Transfer in Global Supply Chains: Multinationals in Sub-Saharan Africa," Kiel Working Papers 1994, Kiel Institute for the World Economy.
  6. Victor Kummritz, 2015. "Global Value Chains: Benefiting the Domestic Economy?," IHEID Working Papers 02-2015, Economics Section, The Graduate Institute of International Studies.
  7. Pfeiffer, Birte & Görg, Holger & Perez-Villar, Lucia, 2015. "The heterogeneity of FDI in Sub-Saharan Africa: How do the horizontal productivity effects of emerging investors differ from those of traditional players?," Kiel Working Papers 1981, Kiel Institute for the World Economy (IfW).
  8. Pérez-Villar, Lucia & Seric, Adnan, 2015. "Knowledge transfer in global supply chains: Multinationals in Sub-Saharan Africa," Kiel Working Papers 1994, Kiel Institute for the World Economy (IfW).

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