Does Foreign Direct Investment Increase the Productivity of Domestic Firms 外文原文.pdfVIP

Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages * Beata K. Smarzynska Abstract: Many countries aim to attract foreign direct investment (FDI) by offering ever more generous incentive packages and justifying their actions with the expected knowledge externalities to be generated by foreign affiliates. Despite being hugely important to public policy, there is little conclusive evidence to support this claim. This study examines firm- level data from Lithuania in an effort to further our understanding of this issue. The empirical results are consistent with the existence of productivity spillovers from FDI taking place through contacts between foreign affiliates and their local suppliers in upstream sectors but there is no indication of spillovers occurring within the same industry. The data indicate that spillovers are not restricted geographically, since local firms seem to benefit from the operation of foreign affiliates both in their own region and in other parts of the country. Moreover, we find that greater productivity benefits are associated with domestic-market- rather than export-oriented foreign companies. We detect no difference, however, between the effects of fully-owned foreign firms and those with joint domestic and foreign ownership. Keywords: spillovers, foreign direct investment, technology transfer JEL classification: F23 World Bank Policy Research Working Paper 2923, October 2002 The Policy Research Working Paper Series disseminates the findings of w