THE ROLE OF FOREIGN DIRECT INVESTMENT IN THE FIRM SELECTION PROCESS IN A HOST COUNTRY: EVIDENCE FROM SLOVENIA

Katja Zajc Kejžar ()

No wp841, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: This paper examines the role of inward foreign direct investment (FDI) in firm selection processes in the Slovenian manufacturing sector in the 1994-2003 period by assessing the impact of the entry and presence of foreign firms on a domestic firm’s probability of exiting. The results confirm that not only do foreign entrants tend to be above-average productive but they also find it easier to exit (particularly those entering in the form of acquisitions). Further, the least efficient firms are found to experience a drop in their survival probability upon a foreign firm’s entry. In addition, a foreign firm’s entry seems to stimulate the selection process not only within the industry but also through backward linkages in the upstream supplying industries. Regarding the productivity spillover effects from foreign to local firms the results suggest that they mostly operate through vertical linkages rather than within the same industry.

Keywords: foreign direct investment; firm selection process; crowding out; productivity spillovers; Slovenia (search for similar items in EconPapers)
JEL-codes: C23 F23 L11 L25 (search for similar items in EconPapers)
Pages: pages
Date: 2006-09-01
New Economics Papers: this item is included in nep-com, nep-int and nep-tid
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