Observing FDI spillover transmission channels: evidence from firms in Uganda

Binyam Afewerk Demena and Peter Bergeijk

Third World Quarterly, 2019, vol. 40, issue 9, 1708-1729

Abstract: We observe and analyse three intra-industry foreign direct investment (FDI) spillover transmission channels using unique firm-level data collected from on-site interviews and observations regarding domestic and foreign firms operating in Uganda in 2015. Our main results are: (1) the spillover effects mainly depend on the channel(s) by which they occur (the competition channel is most important while spillover benefits through the worker mobility and the imitation channels are less prevalent) and (2) both positive and negative spillover effects occur within the same channel and, moreover, effects differ by channel for the same case. These are novel and challenging findings that have not yet been recognised in theoretical and empirical research on FDI spillovers. Our results suggest that long-term pecuniary spillover effects are predominantly stimulated via the competition channel and show that only limited short-term and long-term technological spillover effects occur through the imitation and the movement of workers channels. These channels are not only less prevalent, but also appear to be constrained by competition-determined spillovers. We are confident that these directions for future research will have a high pay-off because, as shown by this exploratory fieldwork, a more complete picture of the spillover effects is reached when the channels are considered simultaneously.

Date: 2019
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DOI: 10.1080/01436597.2019.1596022

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