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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.

Suggested Citation

  • 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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    References listed on IDEAS

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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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