| Abstract: |
We use firm-level data and national input-output tables from 17 countries over
the 2002-2005 period to test new and existing hypotheses about the impact of
foreign direct investment (FDI) on the efficiency of domestic firms in the
host country (i.e., spillovers). Providing evidence from a larger sample of
countries and greater variety of firms than existing studies, with separate
estimates by firm size, age, and sector, we show: a) backward spillovers
(stemming from supplying a foreign firm in the host country or exporting to a
foreign firm) are consistently positive; b) horizontal spillovers are mostly
insignificant but positive for older firms and firms in the service sector; d)
forward spillovers (from purchasing from foreign firms or importing) are also
positive only for old and service sector firms. We find no support for the
hypothesis that spillovers are greater for FDI with more advanced technology.
While efficiency of domestic firms’ is affected by the business environment,
the strength of FDI spillovers is not, either when measured by the degree of
corruption, bureaucratic red tape or by differences across regions that vary
in terms of development. Testing whether spillovers vary with the firm’s
"absorptive capacity" we find: i) distance from the efficiency frontier tends
to dampen horizontal spillovers in manufacturing and backward spillovers among
old firms; ii) whereas firms with a larger share of university educated
workforce are more productive, they do not enjoy greater FDI spillovers than
firms with less educated workers. FDI spillovers hence vary by sectors and
types of firms. |