Product Sophistication and Spillovers from Foreign Direct Investment

Katharina Eck and Stephan Huber
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Katharina Eck: University of Munich

No 340, Working Papers from Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies)

Abstract: Foreign direct investment (FDI) in developing countries is often associated with higher economic growth due to knowledge and technology spillovers to local firms. One way how FDI speeds up growth is that it facilitates the manufacturing of more sophisticated products by local firms. So far, firm-level evidence is missing on how the presence of multinational firms affects the product sophistication of firms in a developing country. This paper aims to fill this gap. We compile an extensive firm-product-level dataset of Indian manufacturing firms which we complement with information on product sophistication and spillovers from FDI. We then explore different channels through which spillovers from multinationals to local Indian firms foster the manufacturing of sophisticated products. We find evidence that spillovers through supplier linkages strongly increase the manufacturing of sophisticated products in India.

Keywords: Multinational Firms; Spillovers; Sophistication; Technological Change (search for similar items in EconPapers)
JEL-codes: F23 O1 O3 (search for similar items in EconPapers)
Pages: 37
Date: 2014-05
New Economics Papers: this item is included in nep-bec, nep-cse and nep-int
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Related works:
Chapter: Product Sophistication and Spillovers from Foreign Direct Investment (2018)
Journal Article: Product sophistication and spillovers from foreign direct investment (2016)
Journal Article: Product sophistication and spillovers from foreign direct investment (2016)
Working Paper: Product sophistication and spillovers from foreign direct investment (2016)
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