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Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela

Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela Abstract Governments often promote inward foreign investment to encourage technology “spillovers” from foreign to domestic firms. Using panel data on Venezuelan plants, we find that foreign equity participation is positively correlated with plant productivity (the “own-plant” effect), but this relationship is only robust for small enterprises. We then test for spillovers from joint ventures to plants with no foreign investment. Foreign investment negatively affects the productivity of domestically owned plants. The net impact of foreign investment, taking into account these two offsetting effects, is quite small. The gains from foreign investment appear to be entirely captured by joint ventures. (JEL F2, O1, O3 ). http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela

American Economic Review , Volume 89 (3) – Jun 1, 1999

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Publisher
American Economic Association
Copyright
Copyright © 1999 by the American Economic Association
Subject
Articles
ISSN
0002-8282
DOI
10.1257/aer.89.3.605
Publisher site
See Article on Publisher Site

Abstract

Abstract Governments often promote inward foreign investment to encourage technology “spillovers” from foreign to domestic firms. Using panel data on Venezuelan plants, we find that foreign equity participation is positively correlated with plant productivity (the “own-plant” effect), but this relationship is only robust for small enterprises. We then test for spillovers from joint ventures to plants with no foreign investment. Foreign investment negatively affects the productivity of domestically owned plants. The net impact of foreign investment, taking into account these two offsetting effects, is quite small. The gains from foreign investment appear to be entirely captured by joint ventures. (JEL F2, O1, O3 ).

Journal

American Economic ReviewAmerican Economic Association

Published: Jun 1, 1999

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