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Is the Impact Really That High? The Effect of FDI in Transition

Hagemejer, Jan and Tyrowicz, Joanna (2009): Is the Impact Really That High? The Effect of FDI in Transition.

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Abstract

Literature is not clear on the eect of FDI on the economic performance in hosting countries. The analysed eects include productivity, propensity to export, access to financial markets, etc. Although foreign subsidiaries usually perform better than the average of the hosting economies, sometimes the selection eect is found to be considerable. We use a unique dataset based on accounting annual reports to the statistical authorities by all medium and large Polish enterprises over a period 1997-2006. We match firms with FDI entry and to a control group of non-foreign owned companies to disentangle the eect of self-selection and FDI entry. We also distinguish explicitly between foreign ownership and privatisation through a foreign investor.

We find strong support of the view that foreign ownership increases access to financing. Evidence suggests also that although FDI enters more frequently companies who already participate in the international trading networks, while approximately 20% of the export intensity may be consistently on average attributed to the treatment effect. On the other hand, we were not able to confirm large effects on effciency not profitability, while the size of the effects are dierent for greenfield investment and private acquisitions as opposed to privatisation.

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