Distance to the Efficiency Frontier and FDI Spillovers

19 Pages Posted: 23 Sep 2004

See all articles by Klara Sabirianova Peter

Klara Sabirianova Peter

University of North Carolina - Chapel Hill; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA; CEPR; IZA; CERGE-EI; University of Ljubljana

Katherine Terrell

Stephen M. Ross School of Business at the University of Michigan; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Gerald R. Ford School of Public Policy

Multiple version iconThere are 2 versions of this paper

Date Written: October 2004

Abstract

We establish that domestically owned firms in two alternative models of emerging market economies, the Czech Republic and Russia, have not been converging to the technological frontier set by foreign owned firms. In both countries, the distance of domestic firms to the frontier grew (in all parts of the distribution) from 1992-1994 to 1995-1997 and did not change from 1995-1997 to 1998-2000. However, the distance to the frontier is orders of magnitude greater in Russia than in the Czech Republic throughout 1992-2000. We also find in both countries that domestic firms in industries with a greater share of foreign firms are falling behind more than domestic firms in industries with a smaller foreign presence. However, in the Czech Republic this "negative spillover" effect is diminished over time, whereas in Russia it continues to cause domestic firms to fall further behind. On the other hand, we find in both countries that foreign firms experience positive spillovers from other foreign firms operating in the same product market. This evidence on the dynamics of efficiency is consistent with the view that economies (firms) need to be more technologically advanced and open to competition in order to be able to gain from foreign presence.

Keywords: Foreign direct investment, productivity, convergence, frontier, knowledge spillovers, Czech Republic, Russia

JEL Classification: C33, D20, F23, G32, L20, O33

Suggested Citation

Sabirianova Peter, Klara and Svejnar, Jan and Terrell, Katherine, Distance to the Efficiency Frontier and FDI Spillovers (October 2004). Available at SSRN: https://ssrn.com/abstract=594541 or http://dx.doi.org/10.2139/ssrn.594541

Klara Sabirianova Peter

University of North Carolina - Chapel Hill ( email )

Chapel Hill, NC 27599
United States

HOME PAGE: http://www.unc.edu/~kpeter

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jan Svejnar (Contact Author)

School of International and Public Affairs, Columbia University, NY, USA ( email )

420 West 118th Street
New York, NY 10027
United States

CEPR

London
United Kingdom

IZA

P.O. Box 7240
Bonn, D-53072
Germany

CERGE-EI

P.O. Box 882
7 Politickych veznu
111 21 Prague 1, Prague
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

University of Ljubljana ( email )

Dunajska 104
Ljubljana, 1000
Slovenia

Katherine Terrell

Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

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