Productivity Spillover Effect of Foreign Direct Investment into Korea

Aggregate and heterogeneous sectoral growth effects of foreign direct investment in Egypt

“…Although this sector dominates FDI inflows in terms of their magnitude relative to output, the anticipated benefits of foreign capital participation are not being realized. This finding is key since the sector potentially provides critical infrastructure that can generate key linkages both between and within all sectors of an economy, as in the case of Korea (Kim & Kim, 2010). The results here do not support this contention in the case of Egypt and may reflect the fact that the country lacks the absorptive capacity to extract know-how associated with FDI inflows.…”

“…Further, Dullien (2005) finds that FDI in the service sector tends to be market-seeking and "crowdsout" domestic investment. Several studies (Arnold, Mattoo, & Narciso, 2008;Fernandes & Paunov, 2012;Kim & Kim, 2010), however, find that transactional services with strong linkages with other sectors, such as telecommunications, information technology (IT), finance, and banking, channel significant inter-sectoral technology and efficiency gains.…”

“…First, in those sectors where Egyptian firms experience the greatest technological lag, the gains from inflows of foreign capital might be expected to be the greatest, especially in advanced sectors, such as manufacturing, telecommunications and IT, and finance and retail although this is the subject of some debate in the literature. Second, the telecommunications and IT sector, in particular, might be expected to generate extensive inter-sectoral growth spillovers (Arnold et al, 2008;Francois & Hoekman, 2010;Kim & Kim, 2010), while the petroleum sector is expected to have few, if any, such spillover effects given its high degree of technology and capital intensity. Given that this is an exploratory analysis with few existing findings, it should be stressed that this study is, in effect, an ex ante exploratory investigation regarding the sectoral distribution of the beneficial effects of FDI inflows to the Egyptian economy.…”