Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301010 
Year of Publication: 
2024
Series/Report no.: 
Bruegel Working Paper No. 16/2024
Publisher: 
Bruegel, Brussels
Abstract: 
This paper provides cross-country firm-level evidence on productivity spillovers from foreign direct investment (FDI), separately for greenfield FDI and crossborder mergers and acquisitions (M&As). The granularity of bilateral sector-level FDI datasets allows for addressing possible endogeneity issues by applying a twostep approach whereby an exogenous FDI measure is constructed from a gravitytype regression of bilateral FDI flows. When looking at the effects of greenfield investments on firm labour productivity we find: i) positive intra-industry spillover effects for firms located in advanced countries, and ii) positive backward spillover effects for firms located in emerging and developing countries. These spillovers are driven entirely by FDI from advanced countries. The results from cross-border M&As are noisier, with weakly suggestive evidence for positive intra-industry spillovers in advanced countries but negative backward spillovers in emerging markets and developing countries.
Subjects: 
Foreign direct investment
Cross-border M&A
Intra-industry spillovers
Backward spillovers
Forward spillovers
JEL: 
F14
F21
F23
F60
Document Type: 
Working Paper
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