How to Stir Up FDI Spillovers: Evidence from a Large Meta-Analysis

28 Pages Posted: 30 Jan 2012

See all articles by Tomas Havranek

Tomas Havranek

Charles University in Prague; Centre for Economic Policy Research (CEPR)

Zuzana Irsova

Charles University in Prague

Date Written: October 26, 2011

Abstract

The voluminous empirical research on horizontal productivity spillovers from foreign investors to domestic firms in transition and developing countries has yielded mixed results. In this paper, we collect 1,205 estimates of horizontal spillovers from the literature and examine which factors influence spillover magnitude. To identify the most important determinants of spillovers among 43 collected variables, we employ Bayesian model averaging. Our results suggest that horizontal spillovers are on average zero, but that their sign and magnitude depend systematically on the characteristics of the domestic economy and foreign investors. The most important determinants are the technology gap between domestic and foreign firms and the ownership structure in investment projects. Foreign investors who form joint ventures with domestic firms and who come from countries with a modest technology edge create the largest benefits for the domestic economy.

Keywords: Bayesian model averaging, Foreign direct investment, Productivity spillovers, Determinants Meta-analysis

JEL Classification: C83, F23, O12

Suggested Citation

Havranek, Tomas and Irsova, Zuzana, How to Stir Up FDI Spillovers: Evidence from a Large Meta-Analysis (October 26, 2011). William Davidson Institute Working Paper No. 1021, Available at SSRN: https://ssrn.com/abstract=1993233 or http://dx.doi.org/10.2139/ssrn.1993233

Tomas Havranek

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Zuzana Irsova (Contact Author)

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

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