Serbia’s New Growth Agenda : FDI Spillovers
This note examines the relationship between the presence of foreign firms and total factor productivity (TFP) growth of domestic firms (called ‘FDI, Foreign Direct Investment, spillovers’) in Serbia over the period of 2005-16. The analysis finds ev...
| Main Authors: | , |
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| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/226601585547175712/Serbia-s-New-Growth-Agenda-Country-Economic-Memorandum http://hdl.handle.net/10986/33562 |
| Summary: | This note examines the relationship
between the presence of foreign firms and total factor
productivity (TFP) growth of domestic firms (called ‘FDI,
Foreign Direct Investment, spillovers’) in Serbia over the
period of 2005-16. The analysis finds evidence of FDI
spillovers in Serbia. Domestic firms on average enjoy higher
productivity because of the presence of FDI firms in the
economy. Moreover, domestic firms that supply to FDI firms
or are located in the same industry as FDI firms, enjoy
higher productivity. This presumably stems from technology
transfer, higher quality standards, or higher competition.
However, productivity of domestic firms sourcing from
industries with a large share of FDI firms find their
productivity reduced, likely due to markups by foreign
firms. The effect of FDI on productivity of domestic firms
also varies by firm size and industry. Small firms benefit
more from spillovers associated with backward linkages (when
they supply to an FDI firm) but are worse off with more
horizontal FDI (when they compete with FDI firms in the same
industry). Firms in high-tech industries benefit more from
horizontal and backward FDI spillovers, but firms in
low-tech industries experience no effect. Lastly, firms in
the transport manufacturing industry do not enjoy any FDI
spillover from foreign firms in their industry. |
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