Foreign Direct Investment and Mark-Up Dynamics: Evidence From Spanish Firms

Posted: 21 Jul 2016

See all articles by Alessandro Sembenelli

Alessandro Sembenelli

University of Turin - Department of Economics and Financial Sciences G. Prato

Georges Siotis

Universidad Carlos III de Madrid - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: May 8, 2008

Abstract

A review of the literature indicates that Foreign Direct Investment has the potential to increase the intensity of competition and to act as a channel for technology transfers. Using a Spanish firm level data set, we disentangle these effects by estimating a dynamic model of firm level performance, which we proxy by mark-ups. We find that FDI has a positive long-run effect on the mark-ups of targets, but this is limited to firms in R&D intensive sectors. In addition, we find weak evidence that foreign presence dampens margins. However, this effect appears to be more than compensated by positive spillovers in the case of knowledge intensive industries.

Keywords: Foreign Direct Investment, Technology transfer, Spillovers, Efficiency, Competition, Panel data, GMM

JEL Classification: F23, L40, L60

Suggested Citation

Sembenelli, Alessandro and Siotis, Georges, Foreign Direct Investment and Mark-Up Dynamics: Evidence From Spanish Firms (May 8, 2008). Journal of International Economics, Vol. 76, 2008, Available at SSRN: https://ssrn.com/abstract=2812122

Alessandro Sembenelli

University of Turin - Department of Economics and Financial Sciences G. Prato ( email )

C. so Unione Sovietica, 218 Bis
Torino, 13820-4020
Italy
+39 011 670 6059 (Phone)
+39 011 670 6062 (Fax)

Georges Siotis (Contact Author)

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 9312 (Phone)
+34 91 624 9875 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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