Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages
American Economic Review · 2004 · Volume 94 · Issue 3
Abstract
Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In contrast with earlier literature that failed to find positive intraindustry spillovers from FDI, this study focuses on effects operating across industries. The analysis, based on firm-level data from Lithuania, produces evidence consistent with positive productivity spillovers from FDI taking place through contacts between foreign affiliates and their local suppliers in upstream sectors. The data indicate that spillovers are associated with projects with shared domestic and foreign ownership but not with fully owned foreign investments.
Keywords
Multinational Firms, International Business, International Linkages to Development, Role of International Organizations, Technological Change: Choices and Consequences, Diffusion Processes, Socialist Enterprises and Their Transitions, Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid
Enable JavaScript for citation tools and additional paper interactions.