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When does FDI have positive spillovers? Evidence from 17 transition market economies

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  • Gorodnichenko, Yuriy
  • Svejnar, Jan
  • Terrell, Katherine

Abstract

We use rich firm-level data and national input–output tables from 17 countries over the 2002–2005 period to test new and existing hypotheses about the impact of foreign direct investment (FDI) on the efficiency of domestic firms in the host country (i.e., spillovers). We document that backward linkages have a consistently positive effect on productivity of domestic firms while horizontal and forward linkages show no consistent effect. We also examine how the strength of spillovers varies by sector, FDI source, institutional environment (corruption, red tape, level of development), firm’s distance to the technological frontier, and other firm- and country-specific characteristics.

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  • Gorodnichenko, Yuriy & Svejnar, Jan & Terrell, Katherine, 2014. "When does FDI have positive spillovers? Evidence from 17 transition market economies," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 954-969.
    • Handle: RePEc:eee:jcecon:v:42:y:2014:i:4:p:954-969
    DOI: 10.1016/j.jce.2014.08.003
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    More about this item

    Keywords

    FDI; Spillovers; Institutions; Transition economies; Efficiency;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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