The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI Spillovers
A vast set of empirical evidence has been amassed over the past decade on the existence and direction of foreign direct investment (FDI)-generated horizontal and vertical spillovers. Overall, the results are mixed, and suggest that the theoretical postulated spillover effects often do not automat...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
University of Warsaw
2015-04-01
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| Series: | Journal of Banking and Financial Economics |
| Subjects: | |
| Online Access: | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1091&context=jbfe |
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| Summary: | A vast set of empirical evidence has been amassed over the past decade on the existence and
direction of foreign direct investment (FDI)-generated horizontal and vertical spillovers. Overall,
the results are mixed, and suggest that the theoretical postulated spillover effects often do not
automatically materialize just because a country is able to attract FDI in the first place. As a result,
more and more research has been devoted to understanding the various conditions that may
explain these mixed results. 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 Indicator
Database we assess how mediating factors influence productivity spillovers to domestic firms
from FDI. We differentiate between three types of mediating factors: (i) a foreign investor’s
spillover potential, (ii) a domestic firm’s absorptive capacity, and (iii) a country’s institutional
framework. We find that all three affect the extent and direction of FDI spillovers on domestic
firm productivity. Moreover, we find that the impact of mediating factors depends on domestic
firms’ productivity and the structure of foreign ownership. |
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| ISSN: | 2353-6845 |