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Productivity Gaps, Inward Investments and Productivity of European firms

  • Davide Castellani

    (University of Urbino)

  • Antonello Zanfei

    (University of Urbino)

Using a balanced panel of firm-level data on the manufacturing industry in France, Italy and Spain over the 1993-1997 period, this paper examines the impact of foreign presence on the productivity of domestic enterprises. We innovate on existing literature by using firm-level data comparable across countries. A generalisation of the results obtained for individual countries is attempted by introducing two key variables in the analysis of the impact of inward investments on domestic performances: productivity gaps between foreign and domestic firms, and productivity levels of MNEs. It is shown that it is the combination of high gaps and high levels of foreign productivity that has the most positive effects. This leads to a critical consideration of both the “catching up” hypothesis, which identifies a positive relation between the size of technological gaps and growth opportunities induced by foreign investments; and the “technological accumulation” hypothesis, which stresses the role of domestic absorptive capacity and of coherence between foreign and domestic technology as determinants of virtuous effects of inward investments. Based on these results, policy implications are drawn, concerning the selection and promotion of inward investments in advanced countries.

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File URL: http://econwpa.repec.org/eps/it/papers/0107/0107001.pdf
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Paper provided by EconWPA in its series International Trade with number 0107001.

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Length: 18 pages
Date of creation: 12 Jul 2001
Date of revision:
Handle: RePEc:wpa:wuwpit:0107001
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP; pages: 18
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Susanto Basu & John G. Fernald, 1994. "Are apparent productive spillovers a figment of specification error?," International Finance Discussion Papers 463, Board of Governors of the Federal Reserve System (U.S.).
  2. Driffield, Nigel, 2001. "The Impact of Domestic Productivity of Inward Investment in the UK," Manchester School, University of Manchester, vol. 69(1), pages 103-19, January.
  3. Fosfuri, Andrea & Motta, Massimo & Rønde, Thomas, 1999. "Foreign Direct Investment and Spillovers through Workers' Mobility," CEPR Discussion Papers 2194, C.E.P.R. Discussion Papers.
  4. Brian Aitken & Ann Harrison & Robert E. Lipsey, 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States," NBER Working Papers 5102, National Bureau of Economic Research, Inc.
  5. Cesare Imbriani & Filippo Reganati, 1999. "Productivity spillovers and regional differences: some evidence on the italian manufacturing sector," CELPE Discussion Papers 48, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
  6. Fontoura, Maria Paula & Flôres Junior, Renato Galvão & Santos, Rogério Guerra, 2000. "Foreign Direct Investment Spillovers: What Can We Learn From Portuguese Data?," Economics Working Papers (Ensaios Economicos da EPGE) 366, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  7. Blomstrom, Magnus & Wolff, E.N., 1989. "Multinational Corporations And Productivity Convergence In Mexico," Working Papers 89-28, C.V. Starr Center for Applied Economics, New York University.
  8. Imbriani, Cesare & Reganati, Filippo, 1997. "Spillovers internazionali di efficienza nel settore manifatturiero italiano - International efficiency spillovers into the Italian manufacturing sector," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 50(4), pages 583-595.
  9. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
  10. Steven Globerman, 1979. "Foreign Direct Investment and `Spillover' Efficiency Benefits in Canadian Manufacturing Industries," Canadian Journal of Economics, Canadian Economics Association, vol. 12(1), pages 42-56, February.
  11. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September.
  12. Kokko, Ari & Tansini, Ruben & Zejan, Mario, 1994. "Productivity Spillovers from FDI in the Uruguayan Manufacturing Sector," SSE/EFI Working Paper Series in Economics and Finance 2, Stockholm School of Economics.
  13. 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.
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