Determinant Factors of FDI Spillovers – What Do We Really Know?

Abstract

Empirical evidence about FDI spillovers to domestic firms has provided mixed results. This global evaluation has recently been complemented with the analysis of the factors that determine the existence, dimension and sign of FDI spillovers. We survey the arguments that support these factors and analyze the empirical evidence already produced. FDI spillovers depend on many factors, frequently with an indeterminate effect. Absorptive capacity of domestic firms and regions are a precondition for incorporating the benefits of FDI spillovers. Concerning the remaining factors, the results suggest opposite effects or, in some cases, are still insufficient to legitimate decisive conclusions.

Institutions, Foreign Direct Investment, and Domestic Investment: Crowding Out or Crowding In?

“…In order to assess the overall costs of rent seeking, or the overall benefits of spillovers, further research is needed to distinguish the opposing effects of rent seeking and technology spillovers on investment behaviour. Finally, studying the aggregate effect of rent seeking and technology spillovers on domestic investment remains challenging because rent seeking and technology spillovers may only have a positive (negative) impact on a subset of firms (see also Crespo and Fontoura (2007)). Microeconomic analysis may help to identify which firms are vulnerable to FDI inflow and/or which firms benefit from FDI inflow.…”

“…Whether FDI generates large spillovers may depend on institutions and governance. Weak intellectual property rights protection may be associated with an overall lower level of FDI inflow and with a relatively lower level of high technology investments (Crespo and Fontoura, 2007). For example, if intellectual property rights are not protected well, foreign firms may choose to not involve their R&D or high-tech manufacturing activities in FDI.…”

Do Foreign Ownership Modes Matter for FDI Spillovers?

“…The findings reported in this chapter add to the literature that suggests that models of spillovers need further development to enable better identification of spillovers (Crespo and Fontoura, 2007;Marin and Sasidharan, 2010). This study finds that spillovers are contingent on foreign ownership modes of MNEs.…”

Spillovers from FDI and local networks

“…The early spillovers literature is extensively reviewed in Blomstrom andKokko (1998), Gorg andGreenway (2004), Crespo and Fontoura (2007), and Smeets (2008). It is meta-analysed in Görg and Strobl (2001), Meyer and Sinani (2009), and Iršová and Havránek (2013).…”