Working Paper: NBER ID: w23643
Authors: Christian Fons-Rosen; Sebnem Kalemli-Ozcan; Bent E. Sorensen; Carolina Villegas-Sanchez; Vadym Volosovych
Abstract: We study the impact of FDI on the productivity of host-country firms. FDI has positive spillovers only when foreign and domestic firms use similar technologies. Channeling FDI to sectors where firms share similar technology would significantly increase productivity spillovers from FDI. We show that inventor mobility across sectors is a key channel of technology transfer. To deal with endogeneity concerns we control for sectoral productivity growth, construct a Bartik-style instrument based on the productivity growth of neighboring countries, and exploit differences in knowledge flows across sectors captured by an asymmetric patent citation matrix.
Keywords: Foreign Direct Investment; Productivity; Knowledge Spillovers; Competition Effects
JEL Codes: E32; F15; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| FDI (F23) | domestic productivity (O49) |
| technological closeness (O30) | positive spillover from FDI to domestic productivity (F23) |
| technological distance (O30) | negative spillover from FDI to domestic productivity (F23) |
| foreign presence in technologically similar sectors (O14) | domestic productivity (O49) |
| FDI (F23) | vertical spillovers to domestic firms (F23) |