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

Brian J. Aitken and Ann Harrison

Chapter 6 in Globalization, Firms, and Workers, 2022, pp 139-152 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Governments often promote inward foreign investment to encourage technology “spillovers” from foreign to domestic firms. Using panel data on Venezuelan plants, we find that foreign equity participation is positively correlated with plant productivity (the “own-plant” effect), but this relationship is only robust for small enterprises. We 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.

Keywords: Globalization; Trade Reform; Foreign Direct Investment; Labour Markets; Employment; Wages; Offshoring; Innovation; Credit Constraints; Industrial Policy; Labour Rights Activism (search for similar items in EconPapers)
JEL-codes: F02 F6 F63 (search for similar items in EconPapers)
Date: 2022
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Journal Article: Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela (1999)
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