Foreign Direct Investment Spillovers in Portugal: Additional Lessons from a Country Study

Abstract

This paper investigates the impact of foreign direct investment (FDI) on the productivity of Portuguese manufacturing sectors. It improves on previous studies by considering the choice of the most appropriate interval of the technological gap for spillovers diffusion. Sectoral variation in the coefficients of the spillover effect is also allowed for. Idiosyncratic factors are identified by means of a fixed effects panel model and positive inter-sectoral spillovers are also examined. Significant spillovers require a proper technological differential between foreign and domestic producers and favourable sectoral characteristics. They may occur in modern industries in which the foreign firms have a clear, but not too sharp, edge on the domestic ones. Agglomeration effects are also a pertinent specific influence. Ce texte examine les r�percussions des investissements directs �trangers (IDE) sur la productivit� des secteurs manufacturiers au Portugal. La sp�cification du mod�le est am�lior�e par le choix de l'intervalle le plus appropri� de l'�cart technologique pour la diffusion des spillovers. Nous tenons �galement compte des variations sectorielles dans les coefficients de spillovers; des facteurs sectoriels idiosyncrasiques sont identifi�s au moyen d'un mod�le � effets fixes. Les spillovers intersectoriels positifs sont examin�s. Des spillovers importants requi�rent un v�ritable �cart technologique entre producteurs �trangers et domestiques ainsi que des caract�ristiques sectorielles favorables. Ils peuvent se produire dans les industries modernes o� les entreprises �trang�res jouissent d'une sup�riorit� nette, mais pas trop marqu�e. Les effets d'agglom�ration exercent aussi une influence sp�cifique pertinente.

Do Multinational Enterprises Push up the Wages of Domestic Firms in the Italian Manufacturing Sector?

“…Empirical evidence supporting the existence of a threshold effect includes the works of Flores et al . () and Proenca et al . ().…”

“…In the first case, MNEs will transmit few benefits to the domestically owned firms; in the second, domestically owned enterprises will be less able to imitate the technology and adopt the knowhow brought by foreign investors, given their lack of a knowledge background (Crespo and Fontoura, 2007;Irsova and Havranek, 2013). Empirical evidence supporting the existence of a threshold effect includes the works of Flores et al (2007) and Proenca et al (2002).…”

“…With the aim of capturing such impact, we have re-estimated equation (9) by adding a proxy of technological gap within the vector of firms' characteristics Xijt. This variable (named GAP) was measured as the difference between each firm's total factor productivity and that of the average foreignowned enterprises in the same sector (Flores et al, 2007;Jabbour and Mucchielli, 2007). 9 Moreover, in order to test whether the technology gap affects domestic wages at intra and/or inter-sectoral level, we added some interaction terms between the spillover variables (HSPILL, FORWSPILL and BACKSPILL) and the GAP variable, as a further step in our analysis.…”

“…() for medium gap in China; Flores et al . () for technological gap ranging from 50 per cent to 80 per cent in Portugal; Dimelis () for low gap in Greece.…”

How Much do Technological Gap, Firm Size, and Regional Characteristics Matter for the Absorptive Capacity of Italian Enterprises?

“…Thus, the technological gap ACij for a firm i is defined in terms of TFP gap, i.e. as the difference between the productivity of the average foreign firm in the sector and each firm in the sector (see Jabbour and Mucchielli 2007;Flores 2007). It is worth noting that, following the main literature, we use the terms 'productivity gap' and 'technology gap' interchangeably, although the concepts are not exactly the same.…”