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Spillovers from foreign direct investment and firm growth: technological, financial and market structure effects

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  • Sophia Dimelis

Abstract

This article examines spillover effects from inward investment on domestic firm growth in the case of a developed host country. The emphasis is placed on the role of the technological gap between domestic and foreign firms in identifying the importance of technology diffusion from the presence of multinationals. An augmented production function is employed to account for technological, financial and market structure effects. Based on a sample of 2589 manufacturing firms operating in Greece between 1992 and 1997, the analysis provides evidence that the significance of spillovers varies with the relative technological position of domestic firms and is higher in the middle and upper quantiles of the growth distribution. It was estimated that a unit increase in the foreign presence in Greek industry raises output growth by 7% on average, in a five-year period, after controlling for technological differences among firms. This result is consistent with the 'absorptive capacity' hypothesis that the technological capability of the host country relates positively to FDI spillover benefits.

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  • Sophia Dimelis, 2005. "Spillovers from foreign direct investment and firm growth: technological, financial and market structure effects," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(1), pages 85-104.
    • Handle: RePEc:taf:ijecbs:v:12:y:2005:i:1:p:85-104
    DOI: 10.1080/1357151042000323094
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    1. C. Imbriani & R. Pittiglio & F. Reganati & E. Sica, 2014. "How Much do Technological Gap, Firm Size, and Regional Characteristics Matter for the Absorptive Capacity of Italian Enterprises?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(1), pages 57-72, February.
    2. Michele Imbruno & Rosanna Pittiglio & Filippo Reganati, 2015. "FDI, Intermediate Inputs and Firm Performance: Theory and Evidence from Italy," Discussion Papers 2015-15, University of Nottingham, GEP.
    3. Mao, Zhenxing (Eddie) & Yang, Yang, 2016. "FDI spillovers in the Chinese hotel industry: The role of geographic regions, star-rating classifications, ownership types, and foreign capital origins," Tourism Management, Elsevier, vol. 54(C), pages 1-12.
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    6. Crespo, Nuno & Fontoura, Maria Paula, 2007. "Determinant Factors of FDI Spillovers - What Do We Really Know?," World Development, Elsevier, vol. 35(3), pages 410-425, March.
    7. Rosanna Pittiglio & Filippo Reganati & Edgardo Sica, 2015. "Do Multinational Enterprises Push up the Wages of Domestic Firms in the Italian Manufacturing Sector?," Manchester School, University of Manchester, vol. 83(3), pages 346-378, June.
    8. Sánchez-Sellero, Pedro & Rosell-Martínez, Jorge & García-Vázquez, José Manuel, 2014. "Absorptive capacity from foreign direct investment in Spanish manufacturing firms," International Business Review, Elsevier, vol. 23(2), pages 429-439.
    9. Anna Ferragina & Fernanda Mazzotta, 2014. "FDI spillovers on firm survival in Italy: absorptive capacity matters!," The Journal of Technology Transfer, Springer, vol. 39(6), pages 859-897, December.
    10. Emmanuel Yeboah Lartey & Alhassan Musah & Bismark Okyere & Abdul-Nasir Yusif, 2018. "Public Debt and Economic Growth: Evidence From Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 8(6), pages 35-45.
    11. Liwiusz Wojciechowski, 2017. "Productivity gap: chance or obstacle in absorbing benefits from FDI in host country," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 5(4), pages 153-170.
    12. Neil Foster-McGregor, 2012. "Innovation and Technology Transfer across Countries," wiiw Research Reports 380, The Vienna Institute for International Economic Studies, wiiw.
    13. FERRAGINA, Anna Maria, 2013. "The Impact of FDI on Firm Survival and Employment: A Comparative Analysis for Turkey and Italy," CELPE Discussion Papers 127, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    14. Rosanna Pittiglio & Filippo Reganati, 2016. "Vertical Spillovers from Multinational Enterprises: Does Technological Gap Matter?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(3), pages 313-323, June.
    15. Jeffrey A. Edwards & Alfredo A. Romero & Zagros Madjd-Sadjadi, 2016. "Foreign direct investment, economic growth, and volatility: a useful model for policymakers," Empirical Economics, Springer, vol. 51(2), pages 681-705, September.
    16. Barbosa, Natália & Eiriz, Vasco, 2009. "Linking corporate productivity to foreign direct investment: An empirical assessment," International Business Review, Elsevier, vol. 18(1), pages 1-13, February.
    17. Jeffrey A. EDWARDS & Cephas B. NAANWAAB & Alfredo A. ROMERO, 2017. "Effect of FDI on real per capita GDP Growth: A Rolling Window Panel Analysis of 60 countries, 1982-2011," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 17(1), pages 19-36.
    18. CUYVERS, Ludo & SOENG, Reth & PLASMANS, Joseph & VAN DEN BULCKE, Daniël, 2008. "Productivity spillovers from foreign direct investment in the Cambodian manufacturing sector: Evidence from establishment-level data," Working Papers 2008004, University of Antwerp, Faculty of Business and Economics.
    19. Klaus E Meyer & Evis Sinani, 2009. "When and where does foreign direct investment generate positive spillovers? A meta-analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(7), pages 1075-1094, September.
    20. Ben Hamida, Lamia & Gugler, Philippe, 2009. "Are there demonstration-related spillovers from FDI?: Evidence from Switzerland," International Business Review, Elsevier, vol. 18(5), pages 494-508, October.
    21. Dimitrios Karamanis, 2022. "Defence partnerships, military expenditure, investment, and economic growth: an analysis in PESCO countries," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 173, Hellenic Observatory, LSE.
    22. VPhuong V. Nguyen, Khoa T. Tran, Nga Thuy Thanh Le and Hoa Doan Xuan Trieu, 2020. "Examining FDI Spillover Effects on Productivity Growth: Firm-Level Evidence from Vietnam," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(1), pages 97-121, March.
    23. Hamida, Lamia Ben, 2013. "Are there regional spillovers from FDI in the Swiss manufacturing industry?," International Business Review, Elsevier, vol. 22(4), pages 754-769.

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    More about this item

    Keywords

    Foreign Direct Investment; Growth; Productivity; Spillovers; Technological Gap; Absorptive capacity; JEL Classification: F23; O30;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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