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Absorptive Capacity and Geographical Distance Two Mediating Factors of FDI Spillovers: a Threshold Regression Analysis for Spanish Firms

Fernando Ubeda and Francisco Pérez-Hernández ()
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Fernando Ubeda: Universidad Autónoma de Madrid
Francisco Pérez-Hernández: Universidad Autónoma de Madrid

Journal of Industry, Competition and Trade, 2017, vol. 17, issue 1, 1-28

Abstract: Abstract This paper investigates the effect of foreign direct investment on productivity growth in the manufacturing industries of Spain. A theoretical model that includes the effects of technological gaps and absorptive capacity, both presenting nonlinear relationships is proposed. A sample of 2722 Spanish manufacturing firms from 1993 to 2006 was used. Threshold regression made it possible to contrast the non-linear relationship between inward FDI and productivity improvement in domestic firms, which is conditioned by the absorptive capacity and geographical distance. Spanish domestic firms with high absorptive capacities benefit from positive spillovers and have sufficient capability to internalize the more complex knowledge provided by multinational firms. The rest of the firms are negatively affected by the presence of multinational firms.

Keywords: FDI; Productivity; Spillovers; Absorptive capacity; Multinational firms (search for similar items in EconPapers)
JEL-codes: C50 D22 D24 F23 (search for similar items in EconPapers)
Date: 2017
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