DOES FDI SPUR INNOVATION, PRODUCTIVITY AND KNOWLEDGE SOURCING BY INCUMBENT FIRMS? EVIDENCE FROM MANUFACTURING INDUSTRY IN ESTONIA

Priit Vahter

No 69, University of Tartu - Faculty of Economics and Business Administration Working Paper Series from Faculty of Economics and Business Administration, University of Tartu (Estonia)

Abstract: Does FDI affect innovation, productivity growth, and knowledge sourcing activities of domestic firms? This study employs detailed firm-level panel-data from Estonia’s manufacturing sector to investigate different channels through which FDI can affect domestic firms. Instrumental variables approach is used to identify the effects. There is no evidence of an effect of FDI entry on local incumbents’ TFP and labour productivity growth in the short term.. However, there are positive spillovers on process innovation. These effects do not depend on the local firms’ distance to the productivity frontier. The results show significant positive correlation between the entry of FDI in a sector and the more direct measures of spillovers in subsequent periods. This is consistent with the view that FDI inflow to a sector intensifies knowledge flows to domestic firms.

Keywords: foreign direct investment; productivity; innovation; learning (search for similar items in EconPapers)
JEL-codes: F21 F23 O31 O33 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2010
New Economics Papers: this item is included in nep-cse, nep-eff, nep-ino, nep-sbm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Does FDI spur innovation, productivity and knowledge sourcing by incumbent firms? Evidence from manufacturing industry in Estonia (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mtk:febawb:69

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