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Cross sectoral FDI spillovers and their impact on manufacturing productivity

Orlic, Edvard, HASHI, Iraj and HISARCIKLILAR, Mehtap (2018) Cross sectoral FDI spillovers and their impact on manufacturing productivity. International Business Review. ISSN 0969-5931

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Abstract or description

This paper explores the relationship between FDI spillovers and productivity in manufacturing firms in five European transition countries. The novelty of our approach lies in exploring different mechanisms of horizontal spillovers and disentangling the impact of backward and forward vertical spillovers from services and manufacturing sectors. We rely on firm level data obtained from the Amadeus database and annual input-output tables. The results from dynamic panel model estimations reveal that local manufacturing firms benefit from the presence of foreign firms in upstream services, especially in the knowledge intensive services, and in downstream manufacturing sector. Demonstration effect is found to be negatively associated with domestic firms’ productivity, while worker mobility and increased competition appear to be the main channels of horizontal knowledge diffusion. The firms’ productivity is also influenced positively by human capital and intangible assets. Finally, we show that the direction and intensity of both vertical and horizontal spillovers depend on the absorptive capacity of domestic firms.

Item Type: Article
Faculty: School of Business, Leadership and Economics > Accounting, Finance and Economics
Date Deposited: 05 Apr 2018 11:59
Last Modified: 24 Feb 2023 13:50

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