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How Much do Technological Gap, Firm Size, and Regional Characteristics Matter for the Absorptive Capacity of Italian Enterprises?

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Abstract

The absorptive capacity—the ability of enterprises to efficiently absorb and internalise knowledge from outside sources—represents the link between firms’ capabilities to implement new products and the external stock of technological opportunities, such as those gleamed from Multinational Enterprises (MNEs). This paper explores whether the effect of foreign direct investment (FDI) on the productivity of Italian domestically-owned firms (DOFs) is dependent on their absorptive capacity. In particular, given the peculiar characteristics of the Italian productive system, our analysis focuses on three different dimensions of the absorptive capacity: the size of the technological gap between foreign-owned firms (FOFs) and DOFs, firm size, and the regional distribution of firms. Our findings suggest that technological gap and firm size matter considerably for the spillover effect. Moreover, spillovers exhibit a sub-national dimension present only in the northeastern region of the peninsula.

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Notes

  1. It is important to consider that productivity gains for domestic firms might be transmitted through the market mechanism (pecuniary externalities). Multinational entry may lead to a higher degree of competition which, as a result, might induce firms to reduce inefficiencies, and thus increase productivity. However, the increase in competition through FDI may also reduce the market share of domestic firms, which could reduce productivity in the presence of scale economies.

  2. Where small firms have 1–49 employees, medium firms 50–249, large firms more than 250 employees.

  3. The northwestern region includes Lombardy, Piedmont, Liguria and Valle d’Aosta; the northeastern region is composed of Friuli Venezia Giulia, Trentino Alto Adige, Veneto, and Emilia Romagna; the central region is composed of Tuscany, Marche, Lazio, Umbria, and finally the southern area includes Abruzzo, Molise, Campania, Calabria, Basilicata, Apulia, Sicily, and Sardinia.

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Authors and Affiliations

  1. University of Rome ‘Sapienza’, Rome, Italy

    C. Imbriani & F. Reganati

  2. Second University of Naples, Naples, Italy

    R. Pittiglio

  3. University of Foggia, Foggia, Italy

    E. Sica

Authors
  1. C. Imbriani
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  2. R. Pittiglio
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  3. F. Reganati
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  4. E. Sica
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Correspondence to R. Pittiglio.

Additional information

Although this work was jointly conceived and produced by the four authors, “Introduction” section was written by Filippo Reganati, “Absorptive Capacity and FDI Spillovers” and “Estimation Strategy and Data Used” sections by Rosanna Pittiglio, “The Italian Case: Some Stylized Facts” and “Empirical Results and Interpretations” sections by Edgardo Sica, and “Conclusions” section by Cesare Imbriani.

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Imbriani, C., Pittiglio, R., Reganati, F. et al. How Much do Technological Gap, Firm Size, and Regional Characteristics Matter for the Absorptive Capacity of Italian Enterprises?. Int Adv Econ Res 20, 57–72 (2014). https://doi.org/10.1007/s11294-013-9439-7

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