FOREIGN DIRECT INVESTMENT AND PRODUCTIVITY SPILLOVERS
Published on: Mar 4, 2016
Transcripts - FOREIGN DIRECT INVESTMENT AND PRODUCTIVITY SPILLOVERS
FOREIGN DIRECT INVESTMENT AND PRODUCTIVITY SPILLOVERS:Firm Level Evidence from Chilean industrial sector . Leopoldo Laborda Daniel Sotelsek University of Alcalá (Spain) University of Alcalá (Spain) firstname.lastname@example.org email@example.com
IntroductionThis paper tries to cover:1. The added efficiency (productivity of the factors)2. Spillovers from foreign direct investment (FDI) make contribution to productivity growth. Hypothesis:a) Higher competition is associated with larger spillovers from foreign presence in the industry, that is, positive productivity through competition.b) Firms with R&D expenditure gain more productivity spillovers from FDI than those without R&D expenditurec) There is a positivity productivity spillover from FDId) There are positive FDI spillovers to each component of productivity growth (TEC, TP, and SEC). In this situation one important questions is: does FDI lead to productivity spillovers?
Methodology Stochastic frontier approach to estimate FDI productivity spillovers in Chilean manufacturing firms. Apply the method of Data Envelopment Analysis (DEA) and compute the Malmquist index to decompose total factor productivity (TFP) growth into technical efficiency change (TEC), technological progress (TP), and scale efficiency change (SEC). a) Deterministic frontier production functions: the stochastic frontier-inefficiency model. b) Decomposing productivity growth: a generalized Malmquist index G0,it +1 = TEC ti ,t +1 + TPit ,t +1 + SEC ti ,t +1 t The statistical source used for this analysis is the World Bank’s Enterprise Surveys (ES).
Empirical Results Chile has been considered as a clasicc emergemt country for 2 reasons_ a) Rate of economic growth during 15 years was very high (5%) b) The added value generated by the chilean industry (important differences betwen sectors) When observing the whole of the Chilean industry, one can observe very similar behaviors, during the studied periods, in the levels of technical efficiency achieved. In this context, the betterment potential (ease) in the use of their productive inputs is close to 53 %.
Empirical Results Competition, absorptive capacity and productivity spillovers.In this section hypotheses a) and b) are tested A test of first hypothesis (see table 8) includes a spillover variable, competitionvariable (HHI) and an interacting variable of spillover and HHI.A test of second hypothesis (see table 9) includes a spillover variable, R&D effortand an interacting variable of R&D effort and spillover in order to evaluate theabsorptive capacity of spillovers in the industry. The negative and significant coefficient on The positive and highly significant coefficients the spillover variable (spillover) in Models confirm the expected positive and significant 1, 2, 3 and 4 in Table 9 implies a positive and significant efficiency spillover in the Chilean output effects of labor and capital industrial sectorsThe coefficient of the research and development dummy The negative coefficient of the(R&D) is positive and significant at the 1% interacting variable between R&Dlevel, suggesting that firms with high R&D effort, on and spilloverssuggests that firmsaverage, have lower efficiencies compared to those withlow R&D effort. with high R&D effort gain more spillovers from foreign firms
Empirical ResultsSources of productivity growth and FDI spilloversTable 10 shows that the major contribution to productivity growth inthe Chilean industrial sectors is from technological progress and fortechnological efficiency change (with the exception of Biotechnologysector). In contrast, the SEC indices are relatively low, suggesting thatthis component do not contribute much to productivity growth. A positive and significant estimate is found for R&D effort, which indicates that firms with high R&D effort have higher SEC than those with R&D effort.
Conclusions The intra-industry productivity spillovers are examined through the spillover variable, and the roles of competition and R&D in extending spillovers from FDI are evaluated to test a channel of productivity spillovers. Authors like Suyanto et al (2009) suggests that policies for strengthening the absorptive capacity of domestic firms through investing in knowledge and human capital formation may be superior to policies that provide concessions for FDI. In this context more general policies should be pursued, which not only attract FDI but also benefit domestic firms, for example, build modern infrastructure, increasing and strengthening the institutions for accelerating and sustaining economic growth.