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Foreign direct investment, spillovers and absorptive capacity: Evidence from quantile regressions

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  • Girma, Sourafel
  • Görg, Holger

Abstract

This paper focuses on the role of absorptive capacity in determining whether or not domestic firms benefit from productivity spillovers from FDI using establishment level data for the UK. We allow for different effects of FDI on establishments located at different quantiles of the productivity distribution by using conditional quantile regression. Overall, while there is some heterogeneity in results across sectors and quantiles, our findings clearly suggest that absorptive capacity matters for productivity spillover benefits. We find evidence for a u-shaped relationship between productivity growth and FDI interacted with absorptive capacity. We also analyse in some detail the impact of changes in absorptive capacity on establishments' ability to benefit from spillovers.

Suggested Citation

  • Girma, Sourafel & Görg, Holger, 2005. "Foreign direct investment, spillovers and absorptive capacity: Evidence from quantile regressions," Kiel Working Papers 1248, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1248
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    More about this item

    Keywords

    Absorptive capacity; Productivity spillovers; Quantile regressions; Foreign direct investment;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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