FDI Spillovers and Time Since Foreign Entry

47 Pages Posted: 30 Nov 2013

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: November 4, 2013

Abstract

This study measures the effect of foreign direct investment (FDI) on the productivity of local firms. Unlike earlier studies, our empirical approach does not require that FDI manifests immediate or permanent effects. We find that foreign entry initially affects productivity of local competitors negatively, but is more than offset by a permanent positive effect on local competitors once majority-foreign-owned firms have been present for a while. The effect on the productivity of local suppliers, in contrast, is transient. The entry of majority-foreign-owned firms boosts productivity of local suppliers after a short adaption period, but then fades. The positive impact of minority-foreign-owned firms on local suppliers is immediate, but smaller and transient.

Keywords: FDI, spillovers, dynamics, timing

JEL Classification: F2

Suggested Citation

Merlevede, Bruno and Schoors, Koen J. L. and Spatareanu, Mariana, FDI Spillovers and Time Since Foreign Entry (November 4, 2013). BOFIT Discussion Paper No. 27/2013, Available at SSRN: https://ssrn.com/abstract=2361350 or http://dx.doi.org/10.2139/ssrn.2361350

Bruno Merlevede

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 (Contact Author)

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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