Knowledge Spillovers and the Timing of Foreign Entry

Posted by D. Daniel Sokol

Bruno Merlevede - Ghent University, Koen Schoors - Ghent University and Mariana Spatareanu (Rutgers) discuss Knowledge Spillovers and the Timing of Foreign Entry.

ABSTRACT: We analyze how foreign presence affects local firm productivity. We relax the standard implicit assumption that spillovers are immediate and permanent. We find that spillovers are dynamic. Foreign entry of a majority foreign owned firm has a short run negative effect on the productivity of local competitors, which is more than offset by a longer run positive effect. The entry of minority foreign owned firms has an immediate, though short-lived, positive effect on local suppliers. The entry of majority foreign owned fi?rms also improves the productivity of local suppliers, but the effect materializes later and lasts longer.