SPILLOVERS FROM FOREIGN DIRECT INVESTMENT:WITHIN OR BETWEEN INDUSTRIES?

Maurice Kugler ()

No 3523, Borradores de Economia from Banco de la Republica

Abstract: This paper contributes an estimation framework to measure both technological and linkage externalities from foreign direct investment (FDI). Empirical research dealt mainly with intra-industry spillovers from FDI with restrictive treatment of inter-industry effects until recently. However, as optimal organization of the multinational corporation (MNC) involves minimization of profit losses due to leakage of technical information to competitors, host country firms within the MNC´s sector experience limited productivity gains ensuing FDI. Host-country producers in other sectors may benefit. For example, MNCs transfer knowledge to local downstream clients, or outsource to local upstream suppliers. Hence, FDI substitutes within-sector domestic investment but complements it across sectors. The net impact on aggregate capital formation by host-country producers hinges on the interaction between linkages and spillovers. Estimations based on the Colombian Manufacturing Census yield the sectoral pattern of FDI spillovers displaying knowledge propagation between but not within industries. The findings reveal outsourcing relationships of MNCs with local upstream suppliers as a channel of diffusion.

Keywords: Foreign direct investment; inter industry spillovers; generic technology; vertical linkages; absorptive capacity (search for similar items in EconPapers)
JEL-codes: C52 F21 F23 F43 O41 (search for similar items in EconPapers)
Pages: 43
Date: 2006-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (164)

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Related works:
Journal Article: Spillovers from foreign direct investment: Within or between industries? (2006)
Working Paper: Spillovers from Foreign Direct Investment: Within or between Industries? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:003523

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