Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper presents a comparative study of the importance of direct technology transfer and spillovers through FDI on a set of ten transition countries, using a common methodology and appropriate methods to account for selection and simultaneity correction. This paper considers by far the largest firm level dataset (more than 90,000 firms) used by any study on the spillover effects of FDI. The main novelty of the paper is the explicit control for various sources of firm heterogeneity when accounting for different effects of FDI on firm performance. Controlling for these variables leads to some interesting results which contrast with the previous empirical work in the field. We find that horizontal spillovers have become increasingly important over the last decade, and they may even become more important than vertical spillovers. Furthermore, this work shows that the heterogeneity of firms in terms of absorptive capacity, size, productivity and technology levels affect the results. These findings suggest that both direct effects from foreign ownership as well as the spillovers from foreign firms substantially depend on the absorptive capacity and productivity level of individual firms. Only more productive firms and firms with higher absorptive capacities are able to both compete with foreign affiliates in the same sector and benefit from the increased upstream demand for intermediates generated by foreign affiliates. In addition, these results show that foreign presence may also affect smaller firms to a larger extent than larger firms, but this impact may be in either direction.

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The paper exploits a large set of more than 8,000 firms for ten advanced transition countries in order to uncover the importance of different channels of technology transfer through FDI and its impact on productivity growth of local firms. In addition to direct effects, we also distinguish between intra-industry (horizontal) and inter-industry (vertical) spillovers from foreign owned firms to local firms. After correcting for foreign investment selection bias and controlling for endogeneity of input demand (using a dynamic system GMM approach), direct FDI effects were found to provide by far the most important productivity effect for local firms in transition countries. Direct effects of FDI are found to provide on average an impact on firm's productivity that is larger by factor 50 than the impact of backward linkages and by factor 500 larger than the impact of horizontal spillovers.

Empirical analyses of knowledge spillovers from foreign direct investment (FDI) offer mixed results; they find positive, neutral and negative FDI spillover effects. This lack of evidence mainly comes from the results of firm-level panel data analysis. This is important since this approach seems to be the most appropriate for estimating FDI spillovers. The paper takes a look at recent substantive and methodological developments in FDI spillover analysis, which have brought some more optimistic results with regard to FDI spillovers, and can help in further development in this field. The main substantive development relates to the introduction of a broad variety of sources of firm heterogeneity (foreign affiliates as well as local firms) in the analysis. Others include differentiation between vertical (inter-industry) and horizontal (intra-industry) spillovers, and host country absorptive capacity for knowledge spillovers. Methodological developments relate to distinguishing between technological/knowledge and productivity spillovers, improvement of modelling and estimation methods, and an increased amount and quality of data. Blomström and Kokko (1998) and Kokko (1992) identify four ways how foreign affiliates may diffuse technology to other firms in the host economy: the demonstration-imitation effect, the competition effect, the foreign linkage effect and the training effect. Demonstration-imitation effects occur if there are arm's length relationships between MNCs and domestic firms, and domestic firms learn superior production technologies and other knowledge from MNCs. The most important forms include imitation of managerial and organizational innovation, and imitation of technology. The competition effect occurs when competition from MNCs forces domestic rivals to update production technologies and techniques to become more productive. The foreign linkage effect relates to knowledge spillovers gained by domestic firms that export to MNCs (Görg and Greenaway, 2004). Training effects can occur if highly skilled personnel is moved from MNCs to domestic firms; these employees may take with them knowledge that can be usefully applied in the host firm (Görg and Strobl, 2001). Not all spillovers are positive, as FDI can generate negative externalities when foreign subsidiaries with superior technology force domestic firms to exit the market. These negative externalities are an aspect of the competition effect and are called the crowding-out effect or the business-stealing effect. Evidence of such negative externalities is presented by Aitken and Harrison (1999) for Colombia and Venezuela, Haddad and Harrison (1993) for Morocco, and Djankov and Hoekman (2000) for the Czech Republic. 1 Several authors further elaborate on specific types of FDI spillovers and introduce new (sub)types of FDI spillovers. Görg and Greenaway (2004) distinguish two mechanisms of the training effect; direct spillovers through complementary workers, and indirect mechanism when workers move and transfer knowledge between foreign and domes...