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

This study hypothesizes that the ownership structure in foreign investment projects affects the extent of vertical and horizontal spillovers from foreign direct investment (FDI) for two reasons. First, affiliates with joint domestic and foreign ownership may face lower costs of finding local supplie...

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Main Authors:	Smarzynska Javorcik, Beata, Spatareanu, Mariana
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	International Investment Long-term Capital Movements F210 Multinational Firms International Business F230 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Firm Organization and Market Structure L220 Contracting Out Joint Ventures Technology Licensing L240 Technological Change: Choices and Consequences Diffusion Processes O330 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, and Aid P330
Online Access:	http://hdl.handle.net/10986/4953

id	okr-10986-4953
recordtype	oai_dc
spelling	okr-10986-49532021-04-23T14:02:20Z To Share or Not to Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment? Smarzynska Javorcik, Beata Spatareanu, Mariana International Investment Long-term Capital Movements F210 Multinational Firms International Business F230 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Firm Organization and Market Structure L220 Contracting Out Joint Ventures Technology Licensing L240 Technological Change: Choices and Consequences Diffusion Processes O330 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, and Aid P330 This study hypothesizes that the ownership structure in foreign investment projects affects the extent of vertical and horizontal spillovers from foreign direct investment (FDI) for two reasons. First, affiliates with joint domestic and foreign ownership may face lower costs of finding local suppliers of intermediates and thus may be more likely to engage in local sourcing than wholly owned foreign subsidiaries. This in turn may lead to higher productivity spillovers to local producers in the supplying sectors (vertical spillovers). Second, the fact that multinationals tend to transfer less sophisticated technologies to their partially owned affiliates than to wholly owned subsidiaries, combined with the better access to knowledge through the participation of the local shareholder in partially owned projects, may facilitate more knowledge absorption by local firms in the same sector (horizontal spillovers). The analysis based on a Romanian firm-level data set produces evidence consistent with these hypotheses. The results suggest that vertical spillovers are associated with projects with shared domestic and foreign ownership but not with fully owned foreign subsidiaries. They also indicate that the negative competition effect of FDI inflows is lower in the case of partially owned foreign investments as it is mitigated by larger knowledge dissipation within the sector. 2012-03-30T07:30:33Z 2012-03-30T07:30:33Z 2008 Journal Article Journal of Development Economics 03043878 http://hdl.handle.net/10986/4953 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article Romania
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	International Investment Long-term Capital Movements F210 Multinational Firms International Business F230 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Firm Organization and Market Structure L220 Contracting Out Joint Ventures Technology Licensing L240 Technological Change: Choices and Consequences Diffusion Processes O330 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, and Aid P330
spellingShingle	International Investment Long-term Capital Movements F210 Multinational Firms International Business F230 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Firm Organization and Market Structure L220 Contracting Out Joint Ventures Technology Licensing L240 Technological Change: Choices and Consequences Diffusion Processes O330 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, and Aid P330 Smarzynska Javorcik, Beata Spatareanu, Mariana To Share or Not to Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?
geographic_facet	Romania
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	This study hypothesizes that the ownership structure in foreign investment projects affects the extent of vertical and horizontal spillovers from foreign direct investment (FDI) for two reasons. First, affiliates with joint domestic and foreign ownership may face lower costs of finding local suppliers of intermediates and thus may be more likely to engage in local sourcing than wholly owned foreign subsidiaries. This in turn may lead to higher productivity spillovers to local producers in the supplying sectors (vertical spillovers). Second, the fact that multinationals tend to transfer less sophisticated technologies to their partially owned affiliates than to wholly owned subsidiaries, combined with the better access to knowledge through the participation of the local shareholder in partially owned projects, may facilitate more knowledge absorption by local firms in the same sector (horizontal spillovers). The analysis based on a Romanian firm-level data set produces evidence consistent with these hypotheses. The results suggest that vertical spillovers are associated with projects with shared domestic and foreign ownership but not with fully owned foreign subsidiaries. They also indicate that the negative competition effect of FDI inflows is lower in the case of partially owned foreign investments as it is mitigated by larger knowledge dissipation within the sector.
format	Journal Article
author	Smarzynska Javorcik, Beata Spatareanu, Mariana
author_facet	Smarzynska Javorcik, Beata Spatareanu, Mariana
author_sort	Smarzynska Javorcik, Beata
title	To Share or Not to Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?
title_short	To Share or Not to Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?
title_full	To Share or Not to Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?
title_fullStr	To Share or Not to Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?
title_full_unstemmed	To Share or Not to Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?
title_sort	to share or not to share: does local participation matter for spillovers from foreign direct investment?
publishDate	2012
url	http://hdl.handle.net/10986/4953
_version_	1764393371812495360

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

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