How Does FDI Inflow Affect Productivity of Domestic Firms? The Role of Horizontal and Vertical Spillovers, Absorptive Capacity and Competition

National Bank of Poland Working Paper No. 42

32 Pages Posted: 14 Apr 2008

See all articles by Marcin Kolasa

Marcin Kolasa

National Bank of Poland; Warsaw School of Economics (SGH)

Date Written: March 2007

Abstract

This paper examines the existence of externalities associated with FDI in a host country by exploiting firm-level panel data covering the Polish corporate sector. The mind findings are as follows: Local firms benefit from foreign presence in the same industry and in downstream industries. Absorptive capacity of domestic firms is highly relevant to the size of spillovers. Competitive pressure facilitates backward spillovers, while market power increases the extent of forward spillovers. Host country equity participation in foreign firms is consistent with higher unconditional productivity spillovers to domestic firms.

Keywords: foreign direct investment, spillovers, firm-level data

JEL Classification: F23, O33

Suggested Citation

Kolasa, Marcin, How Does FDI Inflow Affect Productivity of Domestic Firms? The Role of Horizontal and Vertical Spillovers, Absorptive Capacity and Competition (March 2007). Available at SSRN: https://ssrn.com/abstract=1118766 or http://dx.doi.org/10.2139/ssrn.1118766

Marcin Kolasa (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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