Does Foreign Direct Investment Lead to Productivity Spillovers? Firm Level Evidence from Indonesia

Suyanto Suyanto (), Ruhul Salim and Harry Bloch ()

World Development, 2009, vol. 37, issue 12, pages 1861-1876

Abstract: Summary This paper examines whether spillovers from foreign direct investment (FDI) make any contribution to productivity growth in the Indonesian chemical and pharmaceutical firms using plant-level panel data. The spillover effects from FDI are analyzed using a stochastic frontier approach and productivity growth is decomposed using a generalized Malmquist output-oriented index. The results show positive productivity spillovers from FDI; higher competition is associated with larger spillovers; and domestic firms with R&D gain more spillover benefits compared to those without R&D. FDI spillovers are found to be positive and significant for technological progress and positive, but not significant, for technical and scale efficiency change.

Keywords: FDI; spillovers; frontier; production; function; Malmquist; index; total; factor; productivity; growth (search for similar items in EconPapers)
Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:eee:wdevel:v:37:y:2009:i:12:p:1861-1876

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