Business, Management and Accounting
4 years ago

Trade hinders local firms' productivity gains from foreign investment spillovers.

Eurasian Economic Review
Does trade participation limit domestic firms’ productivity gains from inward foreign direct investment?
René Belderbos, Vincent Van Roy, Leo Sleuwaegen

Paper Summary

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Domestic firms benefit from foreign companies setting up shop in their country, but only if they don't engage in international trade. Foreign companies can help local firms become more productive, especially if they share clients or suppliers. However, if local firms are already involved in trade, the benefits from foreign companies are not as strong. Firms that both import and export benefit the least from foreign companies. Having skilled workers in local firms boosts the benefits from foreign companies, except for when they share clients. Overall, trading with other countries and having foreign companies in the country can have different effects on how productive local firms are.