The effects of foreign direct investment on domestic firms

Jozef Konings

The Economics of Transition, 2001, vol. 9, issue 3, 619-633

Abstract: This paper uses firm‐level panel data to investigate empirically the effects of foreign direct investment on the productivity performance of domestic firms in three emerging economies of Central and Eastern Europe: Bulgaria, Romania and Poland. To this end, a unique firm‐level panel dataset is used with detailed information on foreign ownership at the firm level. Two main questions are addressed in the present paper: (1) do foreign firms perform better than their domestic counterparts? (2) do foreign firms generate spillovers to domestic firms? The estimation technique in this paper takes potential endogeneity of ownership, spillovers and other factors into account by estimating a fixed effects model using instrumental variables in the general methods of moment technique for panel data. Only in Poland, do foreign firms perform better than firms without foreign participation. Moreover, for all three countries studied here, I find no evidence of positive spillovers to domestic firms, on average. In contrast, on average, there are negative spillovers to domestic firms in Bulgaria and Romania, while there are no spillovers to domestic firms in Poland. This suggests a negative competition effect that dominates a positive technology effect. JEL classification: D24, F14, O52, P31.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (280)

Downloads: (external link)
https://doi.org/10.1111/1468-0351.00091

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:etrans:v:9:y:2001:i:3:p:619-633

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0967-0750

Access Statistics for this article

The Economics of Transition is currently edited by Philippe Aghion and Wendy Carlin

More articles in The Economics of Transition from The European Bank for Reconstruction and Development Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().