The paper discusses the standard approaches in constructing the spatial weights matrix, W, and the implications of using such approaches in terms of the potential mis-specification of W. We then look at more recent attempts to measure W in the literature, including: Bayesian (searching for 'best fit'); non-parametric techniques; the use of spatial correlation to estimate W; other iteration techniques; and alternative approaches. Lastly, an illustration is provided based on estimating spatial lag models determining establishment level R&D spending in the UK, finding that differently constructed W matrices produce different estimates of spatial spillovers.A la recherche du « W » RÉ SUMÉ La pre´sente communication se penche sur les me´thodes standards de la structure de la matrice de poids spatiale « W », et les implications de l'emploi de ces me´thodes sur le plan d'une erreur de spe´cification potentielle de W. Elle se penche ensuite sur des tentatives plus re´centes de mesure de W dans certains ouvrages, y compris des infe´rences baye´siennes (recherche de meilleure probabilite´); des techniques non parame´triques; l'emploi d'une corre´lation spatiale pour l'e´valuation de W; des techniques d'ite´ration diverses; et d'autres me´thodes en alternative. Enfin, elle contient une illustration base´e sur l'estimation de mode`les a`de´calage spatial permettant de de´terminer le niveau d'e´tablissement de de´penses en R&D au Royaume-Uni, qui conclut que des matrices W a`structure diffe´rente produisent diffe´rentes e´valuations de de´bordement spatial. En busca de 'W'EXTRACTO Este trabajo trata los planteamientos típicos al construir la matriz de ponderaciones espaciales, W, y las implicaciones de utilizar dichos planteamientos en te´rminos de la posible especificacio´n erro´nea de W. Seguidamente, examinamos intentos ma´s recientes de ponderar W en la bibliografía, incluyendo: bayesiano (búsqueda de lo que 'mejor encaja'); te´cnicas no parame´tricas; el uso de correlacio´n espacial para estimar W; otras te´cnicas de iteracio´n; y planteamientos alternativos. Finalmente, se ofrece una ilustracio´n basada en estimar modelos de retardo (lag) espacial que determinan Richard Harris (to whom correspondence should be sent), el gasto en I'D a nivel de establecimiento en el Reino Unido; se descubre que matrices W construidas de forma diferente producen estimaciones diferentes de excedentes (spillovers) espaciales.

This paper explores the determinants of the productivity in the countries of Eastern Europe (EE) through the perspective of 'narrow' and 'broad' national systems of innovation (NSI). Based on panel econometrics it examines the extent to which systems in EE could be considered '(in)efficient'. Our results suggest that the EE countries have lower levels of productivity than might be expected given their research and development (R&D), innovation and production capabilities. The inefficiencies of 'broad' NSI are compounded by the inefficiencies of 'narrow' NSI in terms of generating numbers of science and technology publications and resident patents relative to R&D employment, compared to the rest of the world. Our results point to an important distinction between technology and production capability as the drivers of productivity improvements, and provide some policy implications.

This article explores the determinants of innovative capability in a sample of MNC subsidiaries operating in the European transition economies. It finds that innovative capability and autonomy in product and process technology appear to be determined by a different set of variables than capability and autonomy in marketing and management. The most independent affiliates have high innovative capability in product and process technology, but are less prominent in marketing and management technology. Affiliates that are closely integrated with their parent company exhibit the opposite pattern. These differences may have some impact on the kinds of spillovers generated by different kinds of foreign direct investment projects.

This paper presents empirical evidence on the role of foreign presence in the performance of domestic manufacturing firms in five Central and Eastern European countries. Data Envelopment Analysis (DEA) was used to estimate a frontier for each sector with similar technology common for five transition countries in the sampleBulgaria, Estonia, Hungary, Poland and Romania. Following Simar and Wilson (J Econom 136(1): 2007), this study applies a truncated regression and bootstrap technique in a second stage post-DEA analysis. Some evidence is found to support the hypothesis that foreign presence has an overall positive spillover effects on the performance of domestic firms.At the outset of the transition from the planned to the market economy the hope was that foreign direct investment (FDI) would improve economic outcomes in Central and Eastern Europe both directly and indirectly. Given the relatively low levels of domestic investment and weak marketing capabilities of most transition economies, FDI was expected to boost economic growth and employment by accelerating investment, transferring new technologies and bringing up-to-date organizational and marketing skills to the host economies. It has been difficult, however, for researchers to evaluate whether such expectations have been borne out by experience. Studies on the impact of FDI have employed various econometric techniques and yielded mixed results.Following Hirschberg and Lloyd's (2002) criticisms of the parametric methods traditionally used to measure the indirect impact of FDI empirically, a non-parametric technique, Data Envelopment Analysis (DEA), is used in this paper to compute a single efficiency score for each observation. Additionally, we apply a methodological alternative in the post-DEA analysis developed by Simar and Wilson (2007). Truncated regression is used in combination with a bootstrap procedure to estimate confidence intervals in a test for various intra-industry spillover effects in this study.Foreign firms are found to be more scale efficient than domestic firms, but there is no strong evidence that foreign firms are more technically efficient than their domestic counterparts. Thus, the average technical efficiency of foreign firms is found to be higher than the average efficiency of their domestic counterparts only in four out of ten sectors. This fact provides some support to the existing argument that foreign firms are not automatically more efficient than domestic firms but that they are guided by the economic environment in which they operate. Therefore, in the second stage of the analysis some environmental characteristics have been identified.In this study, foreign firms are found to be more efficient than domestic counterparts in Hungary and Poland and less efficient in Bulgaria, Romania and Estonia. These findings arguably reflect some differences in local economic conditions. Furthermore, the results of post-DEA analysis 123J Prod Anal (2008) 29:91-102 DOI 10.1007 suggest an overall positive effect from foreign pre...

This paper contributes to the analysis of the impact of FDI on host countries by taking into account the regional dimension of spillover effects. Focusing on the case of Ukraine, we explore the effects of inward FDI on changes in productivity, technology, and efficiency in local firms. For the country as a whole, the results suggest that the presence of foreign-owned firms had a negative impact on productivity change in local firms during the period 1999-2003. However, there were notable differences between the effects in the western and eastern parts of the country: the overall findings were mainly driven by the development in western Ukraine, whereas inward FDI in eastern Ukraine did not seem to have any impact on local productivity growth and technical change. These results arguably reflect deep economic and institutional differences between the two parts of Ukraine, which have led to differences in the character of incoming FDI and differences in the ability of local firms to benefit from FDI. The conclusion is that the impact of FDI on the host economy may vary even at the sub-national level, depending on the specific local environment.