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Which Foreigners are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI

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  • Tomas Havranek

    ()

  • Zuzana Irsova

    ()

Abstract

The principal argument for subsidizing foreign investment, especially in developing and transition economies, is the assumed spillover of technology to local firms. Yet researchers report mixed results on spillovers. To examine the phenomenon in a systematic way, we collected 3,626 estimates from 57 empirical studies on between-sector spillovers and reviewed the literature quantitatively. Our results indicate that model misspecifications reduce the reported estimates, but that journals select relatively large estimates for publication. The underlying spillover to suppliers is positive and economically significant, whereas the spillover to buyers is insignificant. Greater spillovers are generated by investors that come from distant countries and that have only slight technological advantages over local firms. In addition, greater spillovers are received by countries that have underdeveloped financial systems and that are open to international trade.

Suggested Citation

  • Tomas Havranek & Zuzana Irsova, 2010. "Which Foreigners are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI," William Davidson Institute Working Papers Series wp996, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2010-996
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    References listed on IDEAS

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    1. De Long, J Bradford & Lang, Kevin, 1992. "Are All Economic Hypotheses False?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1257-1272, December.
    2. Sophia Rabe-Hesketh & Anders Skrondal, 2012. "Multilevel and Longitudinal Modeling Using Stata, 3rd Edition," Stata Press books, StataCorp LP, edition 3, number mimus2, April.
    3. Xiaming Liu & Chengang Wang & Yingqi Wei, 2009. "Do local manufacturing firms benefit from transactional linkages with multinational enterprises in China?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(7), pages 1113-1130, September.
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    More about this item

    Keywords

    Foreign direct investment; Productivity; Spillovers; Meta-analysis; Publication selection bias;

    JEL classification:

    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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