Technology Transfer Through FDI in Top-10 Transition Countries: How Important are Direct Effects, Horizontal and Vertical Spillovers?

31 Pages Posted: 25 Jun 2003

See all articles by Jože P. Damijan

Jože P. Damijan

University of Ljubljana, Slovenia - Department of International Economics

Mark S. Knell

NIFU Nordic Institute for Studies in Innovation, Research and Education

Boris Majcen

Institute for Economic Research - Slovenia

Matija Rojec

University of Ljubljana - Faculty of Social Sciences

Date Written: February 2003

Abstract

The paper exploits a large set of more than 8,000 firms for ten advanced transition countries in order to uncover the importance of different channels of technology transfer through FDI and its impact on productivity growth of local firms. In addition to direct effects, we also distinguish between intra-industry (horizontal) and inter-industry (vertical) spillovers from foreign owned firms to local firms. After correcting for foreign investment selection bias and controlling for endogeneity of input demand (using a dynamic system GMM approach), direct FDI effects were found to provide by far the most important productivity effect for local firms in transition countries. Direct effects of FDI are found to provide on average an impact on firm's productivity that is larger by factor 50 than the impact of backward linkages and by factor 500 larger than the impact of horizontal spillovers.

Keywords: Foreign direct investments, technology transfer, spillovers, transition economies

JEL Classification: D24, F14

Suggested Citation

Damijan, Joze P. and Knell, Mark S. and Majcen, Boris and Rojec, Matija, Technology Transfer Through FDI in Top-10 Transition Countries: How Important are Direct Effects, Horizontal and Vertical Spillovers? (February 2003). William Davidson Institute Working Paper No. 549. Available at SSRN: https://ssrn.com/abstract=404241 or http://dx.doi.org/10.2139/ssrn.404241

Joze P. Damijan

University of Ljubljana, Slovenia - Department of International Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 61 189 24 00 (Phone)
+386 61 189 26 98 (Fax)

Mark S. Knell (Contact Author)

NIFU Nordic Institute for Studies in Innovation, Research and Education ( email )

Wergelandsveien 7
Oslo, NO-0167
Norway
+4722595161 (Phone)

Boris Majcen

Institute for Economic Research - Slovenia ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Matija Rojec

University of Ljubljana - Faculty of Social Sciences ( email )

Kardeljeva ploscad 5
Ljubljana, 1000
Slovenia

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