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Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela

Ann Harrison () and Brian J. Aitken

American Economic Review, 1999, vol. 89, issue 3, 605-618

Abstract: Governments often promote inward foreign investment to encourage technology 'spillovers' from foreign to domestic firms. Using panel data on Venezuelan plants, the authors find that foreign equity participation is positively correlated with plant productivity (the 'own-plant' effect), but this relationship is only robust for small enterprises. They then test for spillovers from joint ventures to plants with no foreign investment. Foreign investment negatively affects the productivity of domestically owned plants. The net impact of foreign investment, taking into account these two offsetting effects, is quite small. The gains from foreign investment appear to be entirely captured by joint ventures.

JEL-codes: F21 O19 (search for similar items in EconPapers)
Date: 1999
Note: DOI: 10.1257/aer.89.3.605
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