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Estimating direct and indirect effects of foreign direct investment on firm productivity in the presence of interactions between firms

Girma, Sourafel; Yundan, Gong; Holger, Görg; Sandra, Lancheros

Authors

SOURAFEL GIRMA sourafel.girma@nottingham.ac.uk
Professor of Industrial Economics

Gong Yundan y.gong1@aston.ac.uk

Görg Holger holger.goerg@ifw-kiel.de

Lancheros Sandra Sandra.Lancheros@nottingham.edu.cn



Abstract

We implement a method to estimate the direct effects of foreign-ownership on foreign firms' productivity and the indirect effects (or spillovers) from the presence of foreign-owned firms on other foreign and domestic firms' productivity in a unifying framework, taking interactions between firms into account. To do so, we relax a fundamental assumption made in empirical studies examining a direct causal effect of foreign ownership on firm productivity, namely that of no interactions between firms. Based on our approach, we are able to combine direct and indirect effects of foreign ownership and calculate the total effect of foreign firms on local productivity. Our results show that all these effects vary with the level of foreign presence within a cluster, an important finding for the academic literature and policy debate on the benefits of attracting foreign owned firms.

Journal Article Type Article
Publication Date Nov 17, 2014
Journal Journal of International Economics
Print ISSN 0022-1996
Electronic ISSN 0022-1996
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 95
Issue 1
APA6 Citation Girma, S., Yundan, G., Holger, G., & Sandra, L. (2014). Estimating direct and indirect effects of foreign direct investment on firm productivity in the presence of interactions between firms. Journal of International Economics, 95(1), doi:10.1016/j.jinteco.2014.11.007
DOI https://doi.org/10.1016/j.jinteco.2014.11.007
Keywords multinationals, foreign ownership, productivity, spillovers
Publisher URL http://www.sciencedirect.com/science/article/pii/S0022199614001391
Copyright Statement Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0





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