Foreign Direct Investment, Spillovers and Absorptive Capacity: Evidence from Quantile Regressions

36 Pages Posted: 11 Sep 2003

See all articles by Sourafel Girma

Sourafel Girma

Nottingham University Business School

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Multiple version iconThere are 2 versions of this paper

Date Written: July 2003

Abstract

This paper focuses on the role of absorptive capacity in determining whether or not domestic establishments benefit from productivity spillovers from FDI. We analyse this issue using establishment level data for the electronics and engineering sectors in the UK. We distinguish the effect of FDI in the same sector and region from FDI in the same sector but outside the region. We also allow for different effects of FDI on establishments located at different quantiles of the productivity distribution by using conditional quantile regression. Overall, while there is substantial heterogeneity in results across sectors and quantiles, our findings clearly suggest that both absorptive capacity and distance matter for productivity spillover benefits. We find evidence for a u-shaped relationship between absorptive capacity and productivity spillovers from FDI in the region, while there is an inverted u-shaped relationship for spillovers from FDI outside the region.

Keywords: Foreign direct investment, absorptive capacity, productivity spillovers, quantile regressions

JEL Classification: F21, F23

Suggested Citation

Girma, Sourafel and Gorg, Holger, Foreign Direct Investment, Spillovers and Absorptive Capacity: Evidence from Quantile Regressions (July 2003). IIIS Discussion Paper No. 1; GEP Working Paper No. 2002/14. Available at SSRN: https://ssrn.com/abstract=410742 or http://dx.doi.org/10.2139/ssrn.410742

Sourafel Girma

Nottingham University Business School ( email )

Jubilee Campus
Nottingham, NG8 1BB
United Kingdom
+44 0 115 8466656 (Phone)

HOME PAGE: http://www.nottingham.ac.uk/~lizsmg/

Holger Gorg (Contact Author)

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

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