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FDI spillovers at different levels of industrial and spatial aggregation: Evidence from the electricity sector

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  • Del Bo, Chiara F.

Abstract

The European electricity sector has undergone significant reforms in recent years, in the direction of market opening, integration and privatization. National and regional markets are now characterized by the presence of domestic and foreign firms, both privately and publicly owned. Did foreign entry induce positive productivity spillovers to domestic firms in the electricity sector, both at the aggregate and disaggregated level, while also controlling for domestic firms' ownership? This paper examines this issue by focusing on regional foreign direct investment (FDI) spillovers in the aggregated electricity sector and in the disaggregated sub-sectors of generation and distribution. The results show the importance of industry aggregation in determining the existence and sign of regional FDI spillovers for domestic firms. FDI spillovers are then calculated based on a purely geographic scale, by considering the distance between each firm's city of location and firms in neighboring cities. The importance and sign of FDI spillovers is different with respect to the analysis based on regional administrative boundaries, suggesting that spatial aggregation, along with industrial aggregation, is relevant in accounting for productivity spillover effects of foreign presence in the EU electricity sector.

Suggested Citation

  • Del Bo, Chiara F., 2013. "FDI spillovers at different levels of industrial and spatial aggregation: Evidence from the electricity sector," Energy Policy, Elsevier, vol. 61(C), pages 1490-1502.
    • Handle: RePEc:eee:enepol:v:61:y:2013:i:c:p:1490-1502
    DOI: 10.1016/j.enpol.2013.06.119
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    2. Hongzhong Fan & Shi He & Yum K. Kwan, 2019. "Foreign direct investment and productivity spillovers: is China different?," Applied Economics Letters, Taylor & Francis Journals, vol. 26(20), pages 1675-1682, November.
    3. Longe Adedayo Emmanuel & Adebayo Emmanuel Olajide & Muhammad Shehu & Adelokun Oluwole Oluniyi, 2020. "Energy Consumption and Foreign Direct Investment in Nigeria: A Structural Break Analysis," Economic Themes, Sciendo, vol. 58(2), pages 187-201, June.
    4. Polemis, Michael L. & Fafaliou, Irene, 2015. "Electricity regulation and FDIs spillovers in the OECD: A panel data econometric approach," The Journal of Economic Asymmetries, Elsevier, vol. 12(2), pages 110-123.
    5. Wang, Cassandra C. & Wu, Aiqi, 2016. "Geographical FDI knowledge spillover and innovation of indigenous firms in China," International Business Review, Elsevier, vol. 25(4), pages 895-906.

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