Is FDI a potential tool for boosting firm’s performance? Firm level evidence from Ecuador

Segundo Camino-Mogro, Natalia Bermúdez-Barrezueta () and Mary Armijos ()
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Natalia Bermúdez-Barrezueta: Université Catolique de Louvain (UCL)
Mary Armijos: Universidad ECOTEC
Authors registered in the RePEc Author Service: Natalia Bermúdez Barrezueta

Journal of Evolutionary Economics, 2023, vol. 33, issue 2, No 4, 391 pages

Abstract: Abstract In developing countries, the evidence regarding the direct and indirect effects of FDI on economic and financial performance at the firm level is mixed. To contribute to this literature, we provide empirical evidence of direct and indirect effects of FDI on firm’s performance, using return on assets (ROA), gross revenues and gross revenues growth rate as performance measures. We examine the private formal enterprise sector in Ecuador from 2007 to 2018. Our identification strategy relies on the use of the Generalized Method of Moments (GMM) methodology for dynamic panel data which allows us to control for potential endogeneity, autocorrelation and heteroskedasticity issues. The results suggest that firms with inward FDI grow faster than their counterparts, and firms with higher amounts of FDI as a share of total revenues have on average higher levels of gross revenues. Moreover, we find negative horizontal wages and gross revenues spillover effects on gross revenues growth rates, but positive horizontal gross revenues spillover effects on ROA. There is also significant evidence of negative horizontal spillover effects in all economic sectors, whereas evidence for forward and backward spillovers is heterogeneous across them.

Keywords: Foreign Direct Investment; Spillovers; Firm Performance; Ecuador (search for similar items in EconPapers)
JEL-codes: C23 D22 F21 L11 O12 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s00191-022-00806-2

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