Testing for Marginal Spillovers from Foreign Direct Investment

Carlo Altomonte () and Enrico Pennings

No 05-101/4, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We develop a simple test to assess whether horizontal spillover effects from multinational to domestic firms are endogenous to the market structure generated by the entry of the same multinationals. In particular, we analyze the performance of a panel of 10,650 domestic and multinational firms operating in Romania in the period 1995-2001. Controlling for the simultaneity bias in productivity estimates through semi-parametric techniques, we find that changes in domestic firms’ TFP are positively related to the first foreign investment in a specific industry and region, but get significantly weaker and become negative as the number of multinationals that enter in the considered industry/region increases. We can thus recover evidence of changing marginal effects in domestic firms’ TFP, the sign of which depends on a specific threshold in the presence of foreign firms.

Keywords: Multinational firms; productivity; transition economies (search for similar items in EconPapers)
JEL-codes: F23 L10 P20 (search for similar items in EconPapers)
Date: 2005-11-01
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20050101

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