Scandinavian Working Papers in Economics

Working Paper Series,
Trade Union Institute for Economic Research

No 194: Foreign Direct Investment and Productivity Spillovers in Swedish Manufacturing

Patrik Karpaty () and Lars Lundberg ()
Additional contact information
Patrik Karpaty: Örebro University, Postal: ESI, SE-701 82 Örebro, Sweden
Lars Lundberg: Trade Union Institute for Economic Research, Postal: FIEF, Wallingatan 38, SE-111 24 Stockholm, Sweden

Abstract: Based on a panel of data for Swedish manufacturing firms in 1990-2000, this paper finds strong evidence for the existence of positive spillover effects from inward FDI. The presence of foreign ownership in the same industry and region seems to enhance the total factor productivity of domestic firms. Moreover, the size of these FDI spillover effects seems to depend both on the nationality of the foreign MNF as well as on the absorptive capacity of the domestic firm, measured by its own R&D. It appears that this positive relationship between foreign presence and productivity cannot be explained as a consequence of reverse causality, i.e that FDI is attracted to highly productive regions and industries.

Keywords: Multinational firms; Productivity spillovers; Foreign direct investment

JEL-codes: F23; O30

28 pages, June 9, 2004

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