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Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages

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Beata Smarzynska Javorcik

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Abstract

Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In contrast with earlier literature that failed to find positive intraindustry spillovers from FDI, this study focuses on effects operating across industries. The analysis, based on firm-level data from Lithuania, produces evidence consistent with positive productivity spillovers from FDI taking place through contacts between foreign affiliates and their local suppliers in upstream sectors. The data indicate that spillovers are associated with projects with shared domestic and foreign ownership but not with fully owned foreign investments.

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File URL: http://hdl.handle.net/10.1257/0002828041464605
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File URL: http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=94&issue=3&article=11&issue_date=June2004
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 3 (June)
Pages: 605-627
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Handle: RePEc:aea:aecrev:v:94:y:2004:i:3:p:605-627

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  9. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February. [Downloadable!] (restricted)
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  22. Girma, Sourafel & Greenaway, David & Wakelin, Katharine, 2001. "Who Benefits from Foreign Direct Investment in the UK?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 119-33, May. [Downloadable!] (restricted)
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  27. Blomstrom, Magnus, 1986. "Foreign Investment and Productive Efficiency: The Case of Mexico," Journal of Industrial Economics, Blackwell Publishing, vol. 35(1), pages 97-110, September. [Downloadable!] (restricted)
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