When does FDI have positive spillovers? Evidence from 17 transition market economies

We use rich firm-level data and national input-output tables from 17 countries over the 2002-2005 period to test new and existing hypotheses about the impact of foreign direct investment (FDI) on the efficiency of domestic firms in the host country (i.e., spillovers). We document that backward linkages have a consistently positive effect on productivity of domestic firms while horizontal and forward linkages show no consistent effect. We also examine how the strength of spillovers varies by sector, FDI source, institutional environment (corruption, red tape, level of development), firm's distance to the technological frontier, and other firm- and country-specific characteristics. Journal of Comparative Economics 42 (4) (2014) 954-969. Department of Economics, University of California, Berkeley, CA, USA; School of International and Public Affairs, Columbia University, NY, USA; Stephen M. Ross School of Business and the Gerald R. Ford School of Public Policy, University of Michigan, Ann Arbor, MI, USA. (C) 2014 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.