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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| Language: | English |
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University of Warsaw
2015-04-01
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| Series: | Journal of Banking and Financial Economics |
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| Online Access: | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1091&context=jbfe |
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| author | Thomas Farole Deborah Winkler |
| author_facet | Thomas Farole Deborah Winkler |
| author_sort | Thomas Farole |
| collection | DOAJ |
| description | 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. |
| format | Article |
| id | doaj-art-c1b58b7a8e6c462589fe0e7c9300b0f2 |
| institution | Kabale University |
| issn | 2353-6845 |
| language | English |
| publishDate | 2015-04-01 |
| publisher | University of Warsaw |
| record_format | Article |
| series | Journal of Banking and Financial Economics |
| spelling | doaj-art-c1b58b7a8e6c462589fe0e7c9300b0f22025-01-03T00:36:14ZengUniversity of WarsawJournal of Banking and Financial Economics2353-68452015-04-0120151(3)7711210.7172/2353-6845.jbfe.2015.1.4The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI SpilloversThomas Farole0Deborah Winkler1Trade & Competitiveness Global Practice, The World BankTrade & Competitiveness Global Practice, The World BankA 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.https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1091&context=jbfeforeign direct investmentspilloversproductivityfirm characteristicsabsorptive capacityinstitutions |
| spellingShingle | Thomas Farole Deborah Winkler The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI Spillovers Journal of Banking and Financial Economics foreign direct investment spillovers productivity firm characteristics absorptive capacity institutions |
| title | The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI Spillovers |
| title_full | The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI Spillovers |
| title_fullStr | The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI Spillovers |
| title_full_unstemmed | The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI Spillovers |
| title_short | The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI Spillovers |
| title_sort | role of foreign firm characteristics absorptive capacity and the institutional framework for fdi spillovers |
| topic | foreign direct investment spillovers productivity firm characteristics absorptive capacity institutions |
| url | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1091&context=jbfe |
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