Foreign Direct Investment and Productivity Spillovers: Updated Evidence from Central and Eastern Europe

Adam Geršl, Ieva Rubene, Tina Zumer

The paper discusses the inflows of foreign direct investment into the CEE countries and focuses on analysis of productivity spillovers. An overview of the relevance of foreign firms in the CEE economies is presented. Using firm-level data on manufacturing industries for the period 2000–2005, the total factor productivity of domestic firms is estimated using the Petrin and Levinsohn (2003) method and subsequently related within a panel data model to foreign presence in the same industry and in industries linked via the production chain. The presence of productivity spillovers is tested for across several sub-samples to detect possible conditionalities.

Keywords: Foreign direct investment, productivity, spillovers.

Issued: December 2007

Published as: Geršl, A. and M. Hlaváček (2007): Foreign Direct Investment, Corporate Finance, and the Life Cycle of Investment, Czech Journal of Economics and Finance, 57 (9–10), pp. 448–464.

Download: CNB WP No. 8/2007 (pdf, 414 kB)