Technology Spillovers from FDI. Evidence on the Intensity of Different Spillover Channels

Abstract

The aim of this paper is to empirically disentangle specific channels of technology spillovers from FDI to domestic firms. To this end, we look into the mechanisms of technology diffusion through FDI and investigate six measures of spillovers in a sample of Romanian firms for the period 1999–2007. Our results show that the position in the supply chain is essential for capturing FDI spillovers, as local suppliers enjoy productivity gains, while local clients suffer productivity losses. We also show that foreign affiliates internalise all benefits associated with supplier upgrading, thus raising concerns about the social return on technology transfer. Additionally, our approach allows us to separate horizontal spillovers into a competition effect, an imitation/demonstration effect and a labour mobility component. We find only labour mobility to act as an efficient channel for horizontal knowledge diffusion, even though its direction depends highly on human capital.