Using French firm-level panel data, this study investigates R&D spillovers from inward foreign direct investment with respect to both horizontal and vertical linkages (backward and forward). From a CDM model, we estimate an R&D-augmented Cobb-Douglas production function to assess the impact of R&D spillovers on firm performance. The results emphasise that international spillovers (from foreign affiliates to local firms) have a greater effect on firm performance than reverse spillovers (from local firms to foreign affiliates) and are more likely to be backward than forward. Moreover, the effect of backward spillovers depends on a firm's absorptive capacity and is amplified in the case of outsourcing relationships.
The central question of this paper is to test whether multinational firms (MNFs) are more likely to exit the local market than domestic firms. Using firm‐level data for Belgium, we estimate a random effects probit model taking into account the endogeneity of firm size, total factor productivity (TFP) and sunk costs in firm exit. Our results highlight two features of the ‘footloose’ nature of MNFs. First, controlling for firm and sector characteristics, the exit probability of MNFs is larger than that of domestic firms. Second, MNFs have a lower sensitivity to TFP and size than do domestic firms. This means that an improvement in economic performance on the local market will not prevent a multinational from closing its local plant as much as it would for a domestic firm.
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