Discussion Paper Details

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Title: When Does FDI Have Positive Spillovers? Evidence from 17 Transition Market Economies

Author(s): Yuriy Gorodnichenko, Jan Svejnar and Katherine Terrell

Publication Date: February 2014

Keyword(s): efficiency, FDI, spillovers and transition economies

Programme Area(s): Industrial Organization and International Trade and Regional Economics

Abstract: We use rich 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). We document that backward linkages have a consistently positive effect on productivity of domestic firms while horizontal and forward linkages show no consistent effect. We also examine how the strength of spillovers varies by sector, FDI source, business environment (corruption, red tape, level of development), firm?s distance to the technological frontier, education of workers, and other firm- and country-specific characteristics.

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Bibliographic Reference

Gorodnichenko, Y, Svejnar, J and Terrell, K. 2014. 'When Does FDI Have Positive Spillovers? Evidence from 17 Transition Market Economies'. London, Centre for Economic Policy Research.