Firm life cycle and foreign direct investment spillover effect: The case of the Czech Republic

Foreign Direct Investment (FDI) and the resulting spillover effects can be important for a country's development and economic growth. Using panel data from 2004 to 2019 in the Czech Republic's manufacturing industry, this paper finds the following. First, FDI firms generate positive horizo...

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Bibliographic Details
Published in:Economics of transition and institutional change 2023-04, Vol.31 (2), p.319-340
Main Authors: Vu, Duong Hoang, Dehning, Bruce, Pavelková, Drahomíra
Format: Article
Language:English
Subjects:
Companies
Economic growth
FDI
firm‐life cycle
Foreign investment
Manufacturing
Panel data
Spillover effect
spillovers
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Summary:Foreign Direct Investment (FDI) and the resulting spillover effects can be important for a country's development and economic growth. Using panel data from 2004 to 2019 in the Czech Republic's manufacturing industry, this paper finds the following. First, FDI firms generate positive horizontal labour effects and backward labour linkage on domestic firms. However, other hypothesized effects of FDI firms, such as horizontal and backward competition and the forward linkage of FDI, were not significant. Second, FDI firms at the mature and shakeout stage generate more spillover than those at the introduction and growth stage. There is no spillover impact on domestic firms by FDI firms at the decline stage. This is the first paper to examine the role of firm life cycle on the spillover effects of FDI.
ISSN:2577-6975
2577-6983
DOI:10.1111/ecot.12342