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Technology Transfer through FDI in Top-10 Transition Countries: How Important are Direct Effects, Horizontal and Vertical Spillovers?

  • Joze P. Damijan

    ()

  • Mark Knell

    ()

  • Boris Majcen

    ()

  • Matija Rojec

    ()

The paper exploits a large set of more than 8,000 firms for ten advanced transition countries in order to uncover the importance of different channels of technology transfer through FDI and its impact on productivity growth of local firms. In addition to direct effects, we also distinguish between intra-industry (horizontal) and inter-industry (vertical) spillovers from foreign owned firms to local firms. After correcting for foreign investment selection bias and controlling for endogeneity of input demand (using a dynamic system GMM approach), direct FDI effects were found to provide by far the most important productivity effect for local firms in transition countries. Direct effects of FDI are found to provide on average an impact on firm’s productivity that is larger by factor 50 than the impact of backward linkages and by factor 500 larger than the impact of horizontal spillovers.

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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 549.

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Length: 31 pages
Date of creation: 01 Feb 2003
Date of revision:
Handle: RePEc:wdi:papers:2003-549
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