Estimating direct and indirect effects of foreign direct investment on firm productivity in the presence of interactions between firms


We implement a method to estimate the direct effects of foreign-ownership on foreign firms' productivity and the indirect effects (or spillovers) from the presence of foreign-owned firms on other foreign and domestic firms' productivity in a unifying framework, taking interactions between firms into account. To do so, we relax a fundamental assumption made in empirical studies examining a direct causal effect of foreign ownership on firm productivity, namely that of no interactions between firms. Based on our approach, we are able to combine direct and indirect effects of foreign ownership and calculate the total effect of foreign firms on local productivity. Our results show that all these effects vary with the level of foreign presence within a cluster, an important finding for the academic literature and policy debate on the benefits of attracting foreign owned firms.

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Divisions: College of Business and Social Sciences > Aston Business School
College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
Additional Information: © 2014, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
Uncontrolled Keywords: companiestreatment,effectsspillovers,multinational,Economics and Econometrics,Finance
Publication ISSN: 0022-1996
Last Modified: 14 Jun 2024 07:13
Date Deposited: 26 Aug 2015 20:36
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Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
PURE Output Type: Article
Published Date: 2015-01
Published Online Date: 2014-11-07
Authors: Girma, Sourafel
Gong, Yundan (ORCID Profile 0000-0002-3896-6682)
Görg, Holger
Lancheros, Sandra



Version: Accepted Version

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