Transmission channels matter: Identifying spillovers from FDI

The empirical literature on the spillovers of foreign direct investment (FDI) has so far not analysed the well-established theoretical transmission channels through which FDI impacts on domestic firms. This paper shows how channels of transmission matter for productivity spillovers from FDI by provi...

Full description

Saved in:
Bibliographic Details
Published in:The journal of international trade & economic development 2018-10, Vol.27 (7), p.701-728
Main Authors: Demena, Binyam Afewerk, Murshed, Syed Mansoob
Format: Article
Language:English
Subjects:
competition
demonstration
Economic models
FDI
Foreign investment
Labor migration
labour mobility
Mobility
Ownership
Productivity
Proximity
Robustness
spillovers
sub-Saharan Africa
Technology
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The empirical literature on the spillovers of foreign direct investment (FDI) has so far not analysed the well-established theoretical transmission channels through which FDI impacts on domestic firms. This paper shows how channels of transmission matter for productivity spillovers from FDI by providing more fuller and nuanced picture of the effects. We analyse a panel of eight sub-Saharan Africa countries spanning the period 2006-2014 and demonstrate the empirical relevance of distinguishing three channels - demonstration, labour mobility, and competition. We provide measures of these effects and also show that the size, significance, and sign of spillover effects depend on the local absorptive capacity, technology levels, geographical proximity, and foreign ownership structure. Overall, results suggest that demonstration spillovers are large and economically significant, whereas the patterns of labour mobility and competition spillovers are not stable across the various specifications and measures. Finally, the analysis involves several measures of further investigations and robustness checks. Results are robust to the construction of spillover and outcome variables, the introduction of additional explanatory variables and an alternative estimation method.
ISSN:0963-8199
1469-9559
DOI:10.1080/09638199.2018.1439083