FDI and spillovers in the Swiss manufacturing industry: Interaction effects between spillover mechanisms and domestic absorptive capacities

• Published in: New Perspectives in International Business Research Vol. 3; pp. 263 - 287
• Main Authors: Ben Hamida, Lamina, Gugler, Philippe
• Format: Book Chapter
• Language: English
• Published: Emerald Group Publishing Limited 2008
• ISBN: 9781848552784; 1848552785
• ISSN: 1745-8862
• DOI: 10.1016/S1745-8862(08)03012-4

This chapter examines intra-industry spillover effects from inward foreign direct investment (FDI) in Swiss manufacturing firms. It suggests that (a) the assessment of spillovers calls upon a detailed analysis of these effects according to the mechanisms by which they occur (viz. the increase of competition, demonstration effects, and worker mobility), and (b) spillovers depend on the interaction between their mechanisms and the levels of domestic absorptive capacity. Results are affirmative in that high-technology firms benefit from FDI heightening competition, while mid-technology firms benefit from demonstration effects. And low-technology firms, which are not able to benefit from foreign affiliates via demonstration effects alone, manage to reap the benefit via the recruitment of MNCs labor. In addition, only firms which largely invest in absorbing foreign technology benefit from spillovers.