Working Paper: NBER ID: w10893
Authors: Giovanni Peri; Dieter Urban
Abstract: The presence of foreign multinational enterprises may benefit local economies. In particular, highly productive foreign-owned firms may promote technological catch-up of local firms. Such channel of spillovers is defined as "Veblen-Geschenkron" effect of Foreign Direct Investments and is analyzed in this article. Rather than the overall density of foreign-owned plants in a region or sector, it is their productivity advantage that determines the positive effect on domestic firms in geographical and technological proximity. We test this hypothesis using new firm-level data for German and Italian manufacturing firms during the 90's. We find evidence of a significant Veblen-Gerschenkron effect which is robust to different ways of measuring total factor productivity (TFP) of firms and to different empirical specifications.
Keywords: Foreign Direct Investment; Productivity; Veblen-Gerschenkron Effect; Technological Spillovers
JEL Codes: F23; O47; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| FDI density (F23) | domestic firms' productivity growth (O49) |
| productivity gap between domestic firms and foreign-owned firms (F23) | domestic firms' productivity growth (O49) |
| foreign firms' productivity advantage (F23) | domestic productivity growth (O49) |
| productivity gap (O49) | domestic firms' productivity growth (O49) |