DP3485 Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Investment?

Author(s):	Holger Görg, David Greenaway
Publication Date:	August 2002
Keyword(s):	foreign direct investment, productivity spillovers, technology transfer
JEL(s):	F21, F23
Programme Areas:	International Trade and Regional Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=3485

Many governments offer significant inducements to attract inward investment, motivated by the expectation of spillover benefits. This paper begins by reviewing possible sources of spillovers. It then provides a comprehensive evaluation of the empirical evidence on productivity, wages and exports spillovers in developing, developed and transitional economies. Although theory can identify a range of possible spillover channels, robust empirical support for positive spillovers is hard to find. The reasons for this are explored and the paper concludes with a review of policy aspects.