When and where does foreign direct investment generate positive spillovers? A meta-analysis

Abstract

Local firms may attract productivity spillovers from foreign investors, yet these vary with local firms' awareness, capability and motivation to react to foreign entry. In consequence, spillovers vary across countries at different levels of economic development. We apply competitive dynamics theory to analyze these contextual moderators of spillovers, and test hypotheses thus derived in a meta-analysis of the empirical literature on spillovers. Our analysis suggests a curvilinear relationship between spillovers and the host country's level of development in terms of income, institutional framework and human capital.

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Notes

  1. 1.

    Studies based on firm-level data from multiple east European countries find varying results across countries. Konings (2001) suggest that the negative effects for Bulgaria and Romania are attributable to the fact that in the early stage of transition the competition effect dominates. Other authors do not provide theoretical reasoning as to why spillovers would vary across countries (Barrios et al., 2004; Damijan, Knell, Majcen, & Rojec, 2003).

  2. 2.

    Some studies, such as Kathuria (2000, 2001), Buckley et al. (2002), and Sinani and Meyer (2004), use multiple definitions of the spillover variable. Therefore the sum of the papers by definitions of the spillover variable is larger than 66.

  3. 3.

    In papers with multiple similar regressions we take the estimate of the regression with the highest R2.

  4. 4.

    Including the outliers in the analysis results in more significant spillover and firm-level dummy estimates. Therefore we opt for dropping them from the empirical analysis.

  5. 5.

    For studies that report absolute values of t-statistics, we obtain the correct sign from the reported coefficient of the spillover variable.

  6. 6.

    Tertiary education is the total enrollment in tertiary education, regardless of age, expressed as a percentage of the population in the official age group corresponding to this level of education.

  7. 7.

    The critical value is ∂Y/∂Γ c =α̂3+2(α̂4Γ c )=0, where α̂3 and α̂4 are the respective regression coefficients in Model 5, Table 3, and Models 6–9 in Table 4.

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Acknowledgements

We are grateful for helpful comments from editor Arjen van Witteloostuijn and two anonymous reviewers for JIBS, from seminar participants at the Copenhagen Business School, University of Reading and National Cheng-chi University in Taipei, as well as at the AIB conference in Beijing and the Senjaya-Lall conference at Oxford University. We thank Marcin Winiarczyk for his excellent research assistance in preparing the dataset for us. The Danish Social Science Foundation provided financial support (grant no. 24-01-0152), which is gratefully appreciated.

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Correspondence to Klaus E Meyer.

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Accepted by Arjen van Witteloostuijn, Area Editor, 22 July 2008. This paper has been with the authors for three revisions.

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Meyer, K., Sinani, E. When and where does foreign direct investment generate positive spillovers? A meta-analysis. J Int Bus Stud 40, 1075–1094 (2009). https://doi.org/10.1057/jibs.2008.111

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Keywords

  • meta-analysis
  • MNEs and economic development
  • MNEs and economic growth
  • foreign direct investment
  • spillovers
  • institutions and international business