Growth and Convergence in European Transition Economies : The Impact of Foreign Direct Investment

This paper investigates the impact of incoming foreign direct investment on local wages in the Italian manufacturing sector. We find that wage spillovers take place mainly when the technological gap between domestically owned firms and foreign‐owned firms is large. Specifically, a large technological distance between domestically owned and foreign‐owned firms has positive effects on wages paid by domestically owned firms in the same industry and negative on domestic wages in upstream and/or in downstream industries. Finally, inward investment may indeed improve the domestic sectors, although such linkage depends on different characteristics of domestically owned firms and sectors where firms operate.

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“…(), Barrios et al . (), Cheung and Lin (), Karpaty and Lundberg (), Dimelis (), Sohinger () and Takii ().…”

Section: Fdi and Wage Spillovers: A Literature Reviewunclassified

Do Multinational Enterprises Push up the Wages of Domestic Firms in the Italian Manufacturing Sector?

Pittiglio

Reganati

Sica

2014

The Manchester School

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“…While some scholars argue that the larger the gap the more learning and imitation opportunities the domestic enterprises will gain (Findlay, 1978;Keller and Yeaple, 2009;Sjöholm, 1999;Wang and Blomstrom, 1992), others posit the opposite and argue that spillover from FDI is a decreasing function of the technology gap (Girma, Greenaway, and Wakelin, 2001;Kokko, 1994;Sohinger, 2005). While some scholars argue that the larger the gap the more learning and imitation opportunities the domestic enterprises will gain (Findlay, 1978;Keller and Yeaple, 2009;Sjöholm, 1999;Wang and Blomstrom, 1992), others posit the opposite and argue that spillover from FDI is a decreasing function of the technology gap (Girma, Greenaway, and Wakelin, 2001;Kokko, 1994;Sohinger, 2005).…”

Section: Introductionmentioning

confidence: 99%

Chinese MNEs' Outward FDI and Home Country Productivity: The Moderating Effect of Technology Gap

Lyles

et al. 2016

Global Strategy Journal

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Plain language summary Today, more than ever, Chinese multinational enterprises (MNEs) are investing abroad in search of advanced technology and managerial knowledge. Our study aims to understand whether Chinese MNEs' overseas investments benefit their home productivity. Focusing on provinces as the unit of analysis, we capture both direct and indirect effects of overseas investment on the parent company and other related actors. We find that such benefits occur only when local firms have the capability to learn from their MNE neighbors. When the technology gap between a home province and MNEs' host countries is too large, local firms and the economy cannot capture the benefits of reverse knowledge spillover. The identification of many Chinese provinces still not capturing the benefits offers broad implications for both local managers and policy makers. Technical summary This article adds to the literature investigating how emerging economy MNEs' outward foreign direct investment (OFDI) affects domestic productivity and the moderating role of technology gap on reverse spillovers. Considering provinces as the unit of analysis, our research captures both direct and indirect effects of Chinese MNEs' OFDI on the parent company and other related actors and finds that the effects of Chinese MNEs' OFDI on a province's productivity are contingent upon the level of technology gap between that location and host countries. Our estimation reveals a double‐threshold model that groups Chinese provinces into three categories based on their technology gap relative to the host countries. Most provinces are within the middle‐level and low‐level categories, indicating the potential for significant effects of Chinese MNEs' OFDI on domestic productivities. Copyright © 2016 Strategic Management Society.

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“…4 In a related study, drawing on the insights provided by a production function with a low elasticity of substitution between capital and labour, for short-run growth dynamics in the transition economies, Lee and Tcha (2004) empirically show that the marginal contribution of FDI to growth is greater than that of domestic investment. In another study, Sohinger (2005) shows, in a less formal way, that FDI, with its growth-enhancing effects, has played a significant role in setting the transition economies in the CEEB region onto the path of convergence with their more affluent neighbours.…”

Section: A U T H O R C O P Ymentioning

confidence: 99%

Trade, Foreign Direct Investment, and Growth: Evidence from Transition Economies

Nath

2009

Comp Econ Stud

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Using a fixed effects panel data approach, this paper empirically examines the effects of trade and foreign direct investment (FDI) on growth of per capita real GDP in 13 transition economies of Central and Eastern Europe, and the Baltic region from 1991 to 2005. A significant positive effect of trade on growth is a robust result for transition economies of this region. In addition, domestic investment appears to be an important determinant of growth. In general, FDI does not have any significant impact on growth in these transition economies. However, when we control for the effects of domestic investment and trade on FDI, it appears to be a significant determinant of growth for the period after 1995.

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Growth and Convergence in European Transition Economies : The Impact of Foreign Direct Investment

Cited by 33 publications

References 9 publications

Do Multinational Enterprises Push up the Wages of Domestic Firms in the Italian Manufacturing Sector?

Do Multinational Enterprises Push up the Wages of Domestic Firms in the Italian Manufacturing Sector?

Chinese MNEs' Outward FDI and Home Country Productivity: The Moderating Effect of Technology Gap

Trade, Foreign Direct Investment, and Growth: Evidence from Transition Economies

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