Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages
- (pp. 605-627)
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.Citation
Smarzynska Javorcik, Beata. 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages." American Economic Review, 94 (3): 605-627. DOI: 10.1257/0002828041464605JEL Classification
- F23 Multinational Firms; International Business
- O19 International Linkages to Development; Role of International Organizations
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- P31 Socialist Enterprises and Their Transitions
- P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid