To Share or Not to Share : Does Local Participation Matter for Spillovers from Foreign Direct Investment?

To Share or Not to Share : Does Local Participation Matter for Spillovers from Foreign Direct Investment?

This paper examines whether the degree of spillovers from foreign direct investment is affected by the foreign ownership share in investment projects. The analysis, based on an unbalanced panel of Romanian firms from 1998-2000, provides evidence co...

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Bibliographic Details
Main Authors: Javorcik, Beata Smarzynska, Spatareanu, Mariana
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
ACCOUNTING
AFFILIATES
AVERAGE COSTS
COMPARATIVE ANALYSIS
DEVELOPED COUNTRIES
DEVELOPMENT ECONOMICS
ECONOMIC REVIEW
ECONOMIC SECTORS
ECONOMIC THEORY
ECONOMICS RESEARCH
EMPIRICAL ANALYSIS
EMPIRICAL EVIDENCE
EXPORTS
EXPROPRIATION
EXTERNALITIES
FIXED ASSETS
FOREIGN CAPITAL
FOREIGN DIRECT INVESTMENT
FOREIGN ENTRY
FOREIGN FIRMS
FOREIGN INVESTMENT
FOREIGN INVESTORS
FOREIGN OWNERSHIP
GDP
GDP DEFLATOR
HUMAN CAPITAL
IMPORTS
INTERMEDIATE INPUTS
INVESTMENT EXPENDITURES
LABOR PRODUCTIVITY
MERGERS
NEGATIVE EXTERNALITIES
OIL
OWNERSHIP STRUCTURE
POLICY RESEARCH
POLITICAL ECONOMY
POSITIVE EFFECTS
POSITIVE EXTERNALITIES
POSITIVE SPILLOVERS
PRIVATIZATION
PRODUCERS
PRODUCTION FUNCTION
PRODUCTION FUNCTIONS
PRODUCTION INPUTS
PRODUCTIVITY
PRODUCTIVITY GROWTH
SCALE ECONOMIES
SPILLOVERS
STATEMENTS
SUBSIDIARIES
SUBSIDIARY
TECHNOLOGY TRANSFERS
TELECOMMUNICATIONS
TOTAL FACTOR PRODUCTIVITY
TRANSITION ECONOMIES
VALUE ADDED
VARIABLE INPUTS
SPILLOVER EFFECTS
Online Access:http://documents.worldbank.org/curated/en/2003/08/2503684/share-or-not-share-local-participation-matter-spillovers-foreign-direct-investment
http://hdl.handle.net/10986/18136
Description
Summary:This paper examines whether the degree of spillovers from foreign direct investment is affected by the foreign ownership share in investment projects. The analysis, based on an unbalanced panel of Romanian firms from 1998-2000, provides evidence consistent with positive intra-sectoral spillovers resulting from fully-owned foreign affiliates but not from projects with joint domestic and foreign ownership. This finding is consistent with literature suggesting that foreign investors tend to put more resources into technology transfer to their wholly-owned projects than to those owned partially. The data also indicate that the presence of partially foreign-owned projects is correlated with higher productivity of domestic firms in upstream industries, suggesting that domestic suppliers benefit from contacts with multinational customers. But the opposite is true for fully-owned foreign affiliates, which appear to have a negative effect on domestic firms in upstream industries. These results are consistent with the observation that foreign investors entering a host country through greenfield projects are less likely to source locally than those engaged in joint ventures or partial acquisitions. They are also in line with the evidence suggesting that fully-owned foreign subsidiaries use newer or more sophisticated technologies than jointly-owned investment projects, and thus may have higher requirements which only a few, if any, domestic suppliers are able to meet.

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