Are there demonstration-related spillovers from FDI?: Evidence from Switzerland

This paper examines whether there are signs of demonstration-related spillovers from foreign direct investment (FDI). It hypothesizes that the size and the extent of such benefits vary according to the level of the absorptive capacity of local firms. Using detailed firm data from Swiss manufacturing...

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Bibliographic Details
Published inInternational business review Vol. 18; no. 5; pp. 494 - 508
Main Authors Ben Hamida, Lamia, Gugler, Philippe
Format Journal Article
LanguageEnglish
Published Elsevier 01.10.2009
SeriesInternational Business Review
Subjects
Absorptive capacity Demonstration effects FDI Spillovers
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Summary:This paper examines whether there are signs of demonstration-related spillovers from foreign direct investment (FDI). It hypothesizes that the size and the extent of such benefits vary according to the level of the absorptive capacity of local firms. Using detailed firm data from Swiss manufacturing and services/construction, we find strong evidence for demonstration-related spillovers when (a) local firms are not far behind the technological frontier of the industry with a technological gap slightly greater than one, and (b) local firms demonstrate high investment in the absorptive capacity. The results are found to be more consistent in manufacturing than services/construction.
ISSN:0969-5931
1873-6149
DOI:10.1016/j.ibusrev.2009.06.004