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Foreign Direct Investment Spillovers in Portugal: Additional Lessons from a Country Study

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  • Renato G. Flôres
  • Maria Paula Fontoura
  • Rogério Guerra Santos

Abstract

This paper investigates the impact of foreign direct investment (FDI) on the productivity of Portuguese manufacturing sectors. It improves on previous studies by considering the choice of the most appropriate interval of the technological gap for spillovers diffusion. Sectoral variation in the coefficients of the spillover effect is also allowed for. Idiosyncratic factors are identified by means of a fixed effects panel model and positive inter-sectoral spillovers are also examined. Significant spillovers require a proper technological differential between foreign and domestic producers and favourable sectoral characteristics. They may occur in modern industries in which the foreign firms have a clear, but not too sharp, edge on the domestic ones. Agglomeration effects are also a pertinent specific influence. Ce texte examine les répercussions des investissements directs étrangers (IDE) sur la productivité des secteurs manufacturiers au Portugal. La spécification du modèle est améliorée par le choix de l'intervalle le plus approprié de l'écart technologique pour la diffusion des spillovers. Nous tenons également compte des variations sectorielles dans les coefficients de spillovers; des facteurs sectoriels idiosyncrasiques sont identifiés au moyen d'un modèle à effets fixes. Les spillovers intersectoriels positifs sont examinés. Des spillovers importants requièrent un véritable écart technologique entre producteurs étrangers et domestiques ainsi que des caractéristiques sectorielles favorables. Ils peuvent se produire dans les industries modernes où les entreprises étrangères jouissent d'une supériorité nette, mais pas trop marquée. Les effets d'agglomération exercent aussi une influence spécifique pertinente.

Suggested Citation

  • Renato G. Flôres & Maria Paula Fontoura & Rogério Guerra Santos, 2007. "Foreign Direct Investment Spillovers in Portugal: Additional Lessons from a Country Study," The European Journal of Development Research, Taylor and Francis Journals, vol. 19(3), pages 372-390.
    • Handle: RePEc:taf:eurjdr:v:19:y:2007:i:3:p:372-390
    DOI: 10.1080/09578810701507126
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