FOREIGN DIRECT INVESTMENT AND REGIONAL PRODUCTIVITY SPILLOVERS IN US MANUFACTURING

J.K. Mullen and Martin Williams

Review of Urban & Regional Development Studies, 2007, vol. 19, issue 3, 185-196

Abstract: This research examines how inward foreign direct investment (FDI) impacts manufacturing productivity in select industries across US regions. Although some evidence has documented the phenomenon of knowledge spillovers to national economies, little is known about how the regional penetration of foreign investment affects the productivity performance of local firms. The analysis proceeds in a novel fashion by adjusting aggregate data on industry operating statistics to “net out†the contaminating influence of foreign firms producing in each of the host regional economies. A cross section of state†by†industry observations is used to estimate labor productivity, controlling for FDI penetration both by region and by industry. In general, the results demonstrate that domestic firms do not reap productivity gains as a result of a larger presence of foreign affiliates. Related research efforts, although not specifically concerned with the regional transmission of FDI spillovers, offer corroborative support for these findings.

Date: 2007
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