Foreign Ownership and Productivity in Polish Industry: The Case of Polish Manufacturing, 1993-2002

This paper studies the significance of foreign direct investment and its spillover effects in a transition country such as Poland, analyzing a unique cross-industry data set on foreign, domestic private, and domestic public companies. Aspects of foreign presence as a share of the whole industry are measured according to four criteria: foreign equity, sales, investment, and labor. The results show that the level of productivity of domestic private companies has increased steadily since 1994. A high share of foreign sales and foreign equity in the industry has a negative effect on the productivity of private companies, thus implying a crowding-out effect. No evidence has been found for association between productivity in domestic companies and foreign control over multinational enterprise affiliates, which may indicate tacit knowledge spillovers. Control variables, such as one year-lagged labor compensation and scale in domestic private and public companies, are positively associated with their productivities.