Foreign Investment and Domestic Productivity: Identifying Knowledge Spillovers and Competition Effects / Christian Fons-Rosen, Sebnem Kalemli-Ozcan, Bent E. Sorensen, Carolina Villegas-Sanchez, Vadym Volosovych.

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Fons-Rosen, Christian

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w23643.Publication details: Cambridge, Mass. National Bureau of Economic Research 2017.Description: 1 online resource: illustrations (black and white)Subject(s):

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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.

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August 2017.

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.