How does FDI inflow affect productivity of domestic firms? The role of horizontal and vertical spillovers, absorptive capacity and competition

Kolasa, Marcin (2007): How does FDI inflow affect productivity of domestic firms? The role of horizontal and vertical spillovers, absorptive capacity and competition. Published in: National Bank of Poland Working Paper , Vol. 42, (March 2007)

Abstract

This paper examines the existence of externalities associated with FDI in a host country by exploiting firm-level panel data covering the Polish corporate sector. The main findings are as follows. Local firms benefit from foreign presence in the same industry and in downstream industries. Absorptive capacity of domestic firms is highly relevant to the size of spillovers. Competitive pressure facilitates backward spillovers, while market power increases the extent of forward spillovers. Host country equity participation in foreign firms is consistent with higher unconditional productivity spillovers to domestic firms.

• Item Type: MPRA Paper
• Language: English
• Keywords: foreign investment; spillovers; productivity; firm-level data
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

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