FDI Spillovers and the Timing of Foreign Entry

LICOS Discussion Paper No. 267/2010

33 Pages Posted: 28 Aug 2010

See all articles by Bruno Merlevede

Bruno Merlevede

Ghent University - Department of General Economics

Koen J. L. Schoors

Ghent University - Centre for Russian International Socio-Political and Economic Studies (CERISE); Ghent University - Department of General Economics

Mariana Spatareanu

Rutgers University Department of Economics and Division of Global Affairs

Date Written: August 26, 2010

Abstract

This study analyzes the dynamic effect of FDI on local firms’ productivity by relaxing the standard implicit assumption that technological spillovers are immediate and permanent. We find that the entry of majority foreign owned firms has a short run negative effect on the productivity of local competitors, which is more than offset by a longer run positive effect. The entry of minority foreign owned firms has an immediate, though short-lived, positive effect on local suppliers through backward linkages. The entry of majority foreign owned firms also improves the productivity of local suppliers, but the effect materializes later and lasts longer.

Keywords: FDI, spillovers, dynamics, timing

JEL Classification: F2

Suggested Citation

Merlevede, Bruno and Schoors, Koen J. L. and Spatareanu, Mariana, FDI Spillovers and the Timing of Foreign Entry (August 26, 2010). LICOS Discussion Paper No. 267/2010, Available at SSRN: https://ssrn.com/abstract=1666144 or http://dx.doi.org/10.2139/ssrn.1666144

Bruno Merlevede (Contact Author)

Ghent University - Department of General Economics ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium

Koen J. L. Schoors

Ghent University - Centre for Russian International Socio-Political and Economic Studies (CERISE) ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium
+32 9 264 34 78 (Phone)
+32 9 265 35 99 (Fax)

Ghent University - Department of General Economics ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium
+32 9 264 34 78 (Phone)
+32 9 264 35 99 (Fax)

Mariana Spatareanu

Rutgers University Department of Economics and Division of Global Affairs ( email )

360 ML King Jr. Blvd.
Newark, NJ 07102
United States
973 353 5249 (Phone)
973 353 5819 (Fax)

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