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Do Foreign Firms Crowd Out Domestic Firms? Evidence from the Czech Republic

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  • Renáta Kosová

    (Cornell University)

Abstract

I examine how foreign presence affects the growth and survival of domestic firms. Separating a negative crowding out and positive technology spillovers, I analyze whether the crowding out effect is dynamic, that is, domestic firms cut production over time as foreign firms grow, or a static effect realized on foreign entry into the industry. Using 1994-2001 firm-level Czech data, I find evidence of both technology spillovers and crowding out. However, crowding out is only short term; after initial entry shakeout, growing foreign sales increase domestic firm growth and survival, indicating domestic demand creation effect. However, I find no such benefits from domestic competition. (c) 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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  • Renáta Kosová, 2010. "Do Foreign Firms Crowd Out Domestic Firms? Evidence from the Czech Republic," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 861-881, November.
    • Handle: RePEc:tpr:restat:v:92:y:2010:i:4:p:861-881
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