FDI Spillovers and Multinational Firm Heterogeneity

K. Lenaerts and Bruno Merlevede

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: Theoretical work implies that more investment promotion will attract less productive foreign firms. We analyze to what extent less productive foreign firms are capable of generating positive spillover effects. We find that only sufficiently productive foreign firms generate positive backward spillover effects. When we combine foreign and domestic firm heterogeneity, more productive multinationals, and especially those that are more than two standard deviations more productive than an individual domestic firm, are found to be the main source of positive backward spillover effects for the latter. More productive domestic firms benefit from larger positive effects. Supplying less productive multinationals results in negative spillover effects. Lower productivity levels of domestic and foreign firms generally lead to a more negative impact. If investment promotion aims at technology transfer to domestic firms, policy makers should be aware that attracting additional foreign investment might result in zero or negative spillover effects.

Keywords: FDI spillovers; multinationals; firm heterogeneity; technology transfer (search for similar items in EconPapers)
JEL-codes: F23 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-04
New Economics Papers: this item is included in nep-cse, nep-eff, nep-int and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:14/879

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