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

TLDR
In this paper, a comprehensive evaluation of the empirical evidence on productivity, wages and exports spillovers in developing, developed and transitional economies is presented. But, although theory can identify a range of possible spillover channels, robust empirical support for positive spillovers is hard to find.
Abstract
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.

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Citations
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Firm heterogeneity, exporting and foreign direct investment*

TL;DR: A rapidly expanding literature on firm heterogeneity and firm level globalisation strategies has developed over the last decade as discussed by the authors, with new insights on why some firms export and others do not, why some fail to survive in export markets and some choose to produce overseas rather than export.
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Determinant Factors of FDI Spillovers - What Do We Really Know?

TL;DR: In this article, the authors survey the arguments that support these factors and the empirical evidence already produced, and the results show contrary effects or, in some cases, are still insufficient to draw reliable conclusions.
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Capital Account Liberalization: Theory, Evidence, and Speculation

TL;DR: The authors argue that the textbook theory of liberalization holds up quite well to a critical reading of this literature, and explain why it is that most studies do not really address the theory they set out to test.
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Absorptive capacity and productivity spillovers From FDI: a threshold regression analysis

TL;DR: In this article, the effect of foreign direct investment on productivity growth is investigated in manufacturing sectors where technology-exploiting multinationals are prevalent, and the results point to the presence of nonlinear threshold effects: the productivity benefit from FDI increases with absorptive capacity until some threshold level beyond which it becomes less pronounced.
Journal ArticleDOI

Innovation performance and channels for international technology spillovers: Evidence from Chinese high-tech industries

TL;DR: In this paper, the impact of different channels for international technology spillover on the innovation performance of Chinese high-tech industries, using panel data analysis, was investigated empirically, showing that learning-by-exporting (and importing) promotes innovation in Chinese indigenous firms.
References
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Journal ArticleDOI

The role of FDI, R&D accumulation and trade in transferring technology to transition countries: evidence from firm panel data for eight transition countries

TL;DR: In this article, the impact of direct technology transfer through FDI, intra-industry knowledge spillovers from FDI and a firm's own R&D accumulation and spillovers through trade for total factor productivity (TFP) growth of local firms was examined.
Book ChapterDOI

Multinational Corporations and Productivity Convergence in Mexico

TL;DR: This paper showed that the realization of the potentiality for productivity catch-up simply because of backwardness depends strongly on another set of causes, some of which are internal and others external to the countries themselves.
Book ChapterDOI

Local Technological Capability and Productivity Spillovers from FDI in the Uruguayan Manufacturing Sector

TL;DR: The predominant view in the literature on foreign direct investment is that various types of spillover may provide important benefits for the countries that host foreign multinational corporations as discussed by the authors, and that the competitive pressure exerted by foreign affiliates has forced local firms to operate more efficiently and introduce new technologies earlier than would otherwise have been the case.
Journal ArticleDOI

R&D and Technology Spillovers Via FDI: Innovation and Absorptive Capacity

TL;DR: In this article, the authors examined the impact of R&D and technology spillovers from FDI on a firm's productivity growth and found that the learning effect was far more important than the innovative effect in explaining the productivity growth.
Journal ArticleDOI

Spillovers from Foreign Firms through Worker Mobility: An Empirical Investigation*

TL;DR: This paper investigated whether spillovers occur via worker mobility and found that firms which are run by owners who worked for multinationals in the same industry immediately prior to opening up their own firm are more productive than other domestic firms.
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