Journal of Applied Economic Research
ISSN 2712-7435
Externalities of foreign direct investment: empirical analysis of the companies of Ural region
Drapkin I.M., Mariev O.S., Shastina N.V.
Abstract
This research is devoted to the econometric estimation of the impact of foreign direct investment (FDI) externalities on the productivity of Ural region companies. The research describes specific features of the impact that foreign direct investment has on the productivity of national companies which operate in the same field with foreign companies; proposes classification of factors influencing the sign and value of horizontal FDI externalities; investigates econometric models of the estimation of horizontal FDI externalities impact on the productivity of national companies.
Factors influencing the sign and value of horizontal FDI externalities were divided into three groups: factors related to the characteristics of the company, factors related to the characteristics of the industry and factors related to the characteristics of the socio-economic development of the region. Econometric modelling was performed on the basis of the Cobb-Douglas production function with regard to externalities and its determining factors, on the panel data for 862 Ural region companies for the period 2005-2014. In contrast to previous empiric models considering the impact of externalities, in our research we take into account factors of regional development.
The results of econometric modelling show that horizontal externalities are significant and have a negative impact on the productivity of national companies, which means that when a foreign company enters the field, the competition effect (displacement of national companies) exceeds the demonstration effect (transition of technology, management skills). This fact is explained by a dramatic technological gap between national and foreign companies. The obtained results and recommendations could be used in the development of a regional investment policy for the improvement of the adaptation capacity of national production companies<object classid="clsid:38481807-CA0E-42D2-BF39-B33AF135CC4D" id="ieooui"></object>
Keywords
Key words: foreign direct investment, companies productivity, externalities, horizontal (intra-industry) effects, econometric modelling, region
About Authors
DOI: http://dx.doi.org/10.15826/vestnik.2015.14.5.043
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