Catching-Up to Foreign Technology? Evidence on the "Veblen-Gerschenkron" Effect of Foreign Investments

40 Pages Posted: 22 Nov 2004

See all articles by Dieter M. Urban

Dieter M. Urban

Johannes Gutenberg University of Mainz - Institute for International Economic Theory; CESifo (Center for Economic Studies and Ifo Institute)

Giovanni Peri

University of California, Davis - Department of Economics

Date Written: November 2004

Abstract

The presence of foreign multinational enterprises may benefit local economies. In particular, highly productive foreign-owned firms may promote technological catch-up of local firms. Such channel of spillovers is defined as "Veblen-Geschenkron" effect of Foreign Direct Investments and is analyzed in this article. Rather than the overall density of foreign-owned plants in a region or sector, it is their productivity advantage that determines the positive effect on domestic firms in geographical and technological proximity. We test this hypothesis using new firm-level data for German and Italian manufacturing firms during the 90's. We find evidence of a significant Veblen-Gerschenkron effect which is robust to different ways of measuring total factor productivity (TFP) of firms and to different empirical specifications.

Suggested Citation

Urban, Dieter M. and Peri, Giovanni, Catching-Up to Foreign Technology? Evidence on the "Veblen-Gerschenkron" Effect of Foreign Investments (November 2004). NBER Working Paper No. w10893. Available at SSRN: https://ssrn.com/abstract=618575

Dieter M. Urban

Johannes Gutenberg University of Mainz - Institute for International Economic Theory ( email )

D 55099 Mainz
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Giovanni Peri (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-3033 (Phone)
530-752-9382 (Fax)

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