Is the Effect Really so Large? Firm‐Level Evidence on the Role of FDI in a Transition Economy

39 Pages Posted: 20 Mar 2012

See all articles by Jan Hagemejer

Jan Hagemejer

National Bank of Poland; University of Warsaw - Faculty of Economic Sciences

Joanna Tyrowicz

National Bank of Poland; University of Warsaw

Date Written: April 2012

Abstract

Foreign subsidiaries usually perform better than domestic enterprises, but selection effects have been acknowledged in the literature. This article contributes by quantitatively evaluating the size of the selection effects and direct effects of FDI entry. We use a large panel of firm‐level data from Poland and match foreign‐owned firms to a control group of non‐foreign‐owned companies and analyse various performance indicators. In terms of efficiency measures, between 50 and 70 percent of the foreign affiliates advantage may be attributed to direct ownership effects. However, in the case of export intensity, the majority of the differential between the domestic companies and foreign subsidiaries is attributable to selection effects: MNEs choose export‐oriented companies and sectors.

Keywords: FDI, transition, propensity score matching, Poland, firm‐level analysis

JEL Classification: P45, P52, C14, O16

Suggested Citation

Hagemejer, Jan and Tyrowicz, Joanna, Is the Effect Really so Large? Firm‐Level Evidence on the Role of FDI in a Transition Economy (April 2012). Economics of Transition, Vol. 20, Issue 2, pp. 195-233, 2012. Available at SSRN: https://ssrn.com/abstract=2026341 or http://dx.doi.org/10.1111/j.1468-0351.2012.00433.x

Jan Hagemejer

National Bank of Poland ( email )

00-919 Warsaw
Poland

University of Warsaw - Faculty of Economic Sciences ( email )

Dluga Street 44/50
Warsaw, 00-241
Poland

Joanna Tyrowicz

National Bank of Poland

00-919 Warsaw
Poland

University of Warsaw ( email )

Krakowskie Przedmiescie 26/28
Warszawa, Pl-00681
Poland

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