Foreign-invested and domestic firm attributes and spillover effects: Evidence from Brazil

Abstract

This study focuses on productivity spillover effects of foreign direct investment (FDI) using firm-level panel data from Brazilian manufacturing firms. We seek to determine what attributes of foreign-invested enterprises (FIEs) and domestic firms are associated with the transfer and absorption of spillover effects, respectively. We find that when spillover effects are measured at the aggregate level only, (positive) horizontal and backward productivity spillovers can be identified. However, when FIEs are disaggregated, those horizontal and backward spillover effects are most closely associated with majority foreign ownership and high-export profiles. Moreover, we can now identify positive forward spillovers transmitted by low-importing and low-exporting FIEs exclusively to high-technology domestic firms. Finally, our investigation demonstrates that for domestic firms, low productivity levels and the absence of worker training preclude the absorption of certain types of spillover effects but still allow for the absorption of other types.