Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages

Posted: 4 Nov 2004

See all articles by Beata Smarzynska Javorcik

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; World Bank - Development Research Group (DECRG); Centre for Economic Policy Research (CEPR)

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Abstract

Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In contrast with earlier literature that failed to find positive intraindustry spillovers from FDI, this study focuses on effects operating across industries. The analysis, based on firm-level data from Lithuania, produces evidence consistent with positive productivity spillovers from FDI taking place through contacts between foreign affiliates and their local suppliers in upstream sectors. The data indicate that spillovers are associated with projects with shared domestic and foreign ownership but not with fully owned foreign investments.

JEL Classification: F2, O1, O3

Suggested Citation

Javorcik, Beata Smarzynska, Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages. Available at SSRN: https://ssrn.com/abstract=613968

Beata Smarzynska Javorcik (Contact Author)

University of Oxford - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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