Do domestic firms benefit from geographic proximity with FDI? Evidence from the privatization of the Czech glass industry

Elisa Gaelotti ()
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Elisa Gaelotti: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic, http://ies.fsv.cuni.cz/
Authors registered in the RePEc Author Service: Elisa Galeotti ()

No 2008/20, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This paper analyzes the effects of geographical proximity and agglomeration of FDIs (foreign direct investments) on domestic firms in the privatized glass sector in the Czech Republic. The motivation for this research is based on the scant evidence in Central and Eastern Europe of the effects of geographical proximity and agglomeration on the productivity of domestic firms. This study aims to explain how spillovers are transferred from FDIs to domestic firms. The econometrical analysis, using original panel data from 1990 to 2006, provides evidence that the agglomeration of FDIs has a negative and significant effect on the productivity of domestic firms in the glass sector at a 5% level. The effect of geographical proximity to FDIs is significant at a 10% level but not in all models. The results support the importance of geographic proximity and agglomeration of FDIs and conform with the evidence that shows that FDIs have produced negative spillovers on domestic firms in transition countries.

Keywords: Foreign direct investments; agglomeration economies; panel data; regional location; Czech Republic; glass industry (search for similar items in EconPapers)
JEL-codes: C23 F21 F23 L61 O18 R12 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2008-09, Revised 2008-09
New Economics Papers: this item is included in nep-eff, nep-geo, nep-tra and nep-ure
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