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    Rights statement: This is the author’s version of a work that was accepted for publication in International Journal of Production Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Journal of Production Economics, 251, 2022 DOI: 10.1016/j.ijpe.2022.108546

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Productivity with Endogenous FDI Spillovers: A Novel Estimation Approach

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Productivity with Endogenous FDI Spillovers: A Novel Estimation Approach. / Bournakis, Ioannis; Tsionas, Mike.
In: International Journal of Production Economics, Vol. 251, 108546, 30.09.2022.

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Harvard

Bournakis, I & Tsionas, M 2022, 'Productivity with Endogenous FDI Spillovers: A Novel Estimation Approach', International Journal of Production Economics, vol. 251, 108546. https://doi.org/10.1016/j.ijpe.2022.108546

APA

Bournakis, I., & Tsionas, M. (2022). Productivity with Endogenous FDI Spillovers: A Novel Estimation Approach. International Journal of Production Economics, 251, Article 108546. https://doi.org/10.1016/j.ijpe.2022.108546

Vancouver

Bournakis I, Tsionas M. Productivity with Endogenous FDI Spillovers: A Novel Estimation Approach. International Journal of Production Economics. 2022 Sept 30;251:108546. Epub 2022 Jun 26. doi: 10.1016/j.ijpe.2022.108546

Author

Bournakis, Ioannis ; Tsionas, Mike. / Productivity with Endogenous FDI Spillovers : A Novel Estimation Approach. In: International Journal of Production Economics. 2022 ; Vol. 251.

Bibtex

@article{6da72326e1934916b6b32025b01adb6a,
title = "Productivity with Endogenous FDI Spillovers: A Novel Estimation Approach",
abstract = "The paper develops a new methodological framework for evaluating the role of FDI in the domestic economy. We firstly propose a measurement of Total Factor Productivity (TFP), which accounts for endogenous FDI knowledge spillovers. Our estimation allows knowledge spillovers to co-evolve with output and inputs selection, ensuring that the estimated production inputs are consistent whilst correctly identifying performance improvements. After deriving unbiased TFP measures at the firm level, we aggregate them at the industry level to search for reallocation effects driven by the FDI presence. Our methodology distinguishes between within-firm gains and industry reallocation effects from FDI. We apply our novel framework to a sample of 7699 manufacturing firms from six EU countries. The main findings are: (i) endogenous FDI spillovers correct for the omitted variable bias in the estimation of production inputs; (ii) inter-industry spillovers are important sources of TFP gains; (iii) the realization of gains from FDI knowledge spillovers are dependent on the absorptive capacity of the firm (iv) higher levels of FDI presence in the local economy can contribute to aggregate TFP increases as much as 33%. The paper offers the basis for considering new policy perspectives on FDI incentives and suggests new approaches for modeling the mechanisms through which domestic firms can experience productivity gains from their interaction with foreign counterparts in a globalized business environment.",
keywords = "Industrial and Manufacturing Engineering, Management Science and Operations Research, Economics and Econometrics, General Business, Management and Accounting",
author = "Ioannis Bournakis and Mike Tsionas",
note = "This is the author{\textquoteright}s version of a work that was accepted for publication in International Journal of Production Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Journal of Production Economics, 251, 2022 DOI: 10.1016/j.ijpe.2022.108546",
year = "2022",
month = sep,
day = "30",
doi = "10.1016/j.ijpe.2022.108546",
language = "English",
volume = "251",
journal = "International Journal of Production Economics",
issn = "0925-5273",
publisher = "Elsevier Science B.V.",

}

RIS

TY - JOUR

T1 - Productivity with Endogenous FDI Spillovers

T2 - A Novel Estimation Approach

AU - Bournakis, Ioannis

AU - Tsionas, Mike

N1 - This is the author’s version of a work that was accepted for publication in International Journal of Production Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Journal of Production Economics, 251, 2022 DOI: 10.1016/j.ijpe.2022.108546

PY - 2022/9/30

Y1 - 2022/9/30

N2 - The paper develops a new methodological framework for evaluating the role of FDI in the domestic economy. We firstly propose a measurement of Total Factor Productivity (TFP), which accounts for endogenous FDI knowledge spillovers. Our estimation allows knowledge spillovers to co-evolve with output and inputs selection, ensuring that the estimated production inputs are consistent whilst correctly identifying performance improvements. After deriving unbiased TFP measures at the firm level, we aggregate them at the industry level to search for reallocation effects driven by the FDI presence. Our methodology distinguishes between within-firm gains and industry reallocation effects from FDI. We apply our novel framework to a sample of 7699 manufacturing firms from six EU countries. The main findings are: (i) endogenous FDI spillovers correct for the omitted variable bias in the estimation of production inputs; (ii) inter-industry spillovers are important sources of TFP gains; (iii) the realization of gains from FDI knowledge spillovers are dependent on the absorptive capacity of the firm (iv) higher levels of FDI presence in the local economy can contribute to aggregate TFP increases as much as 33%. The paper offers the basis for considering new policy perspectives on FDI incentives and suggests new approaches for modeling the mechanisms through which domestic firms can experience productivity gains from their interaction with foreign counterparts in a globalized business environment.

AB - The paper develops a new methodological framework for evaluating the role of FDI in the domestic economy. We firstly propose a measurement of Total Factor Productivity (TFP), which accounts for endogenous FDI knowledge spillovers. Our estimation allows knowledge spillovers to co-evolve with output and inputs selection, ensuring that the estimated production inputs are consistent whilst correctly identifying performance improvements. After deriving unbiased TFP measures at the firm level, we aggregate them at the industry level to search for reallocation effects driven by the FDI presence. Our methodology distinguishes between within-firm gains and industry reallocation effects from FDI. We apply our novel framework to a sample of 7699 manufacturing firms from six EU countries. The main findings are: (i) endogenous FDI spillovers correct for the omitted variable bias in the estimation of production inputs; (ii) inter-industry spillovers are important sources of TFP gains; (iii) the realization of gains from FDI knowledge spillovers are dependent on the absorptive capacity of the firm (iv) higher levels of FDI presence in the local economy can contribute to aggregate TFP increases as much as 33%. The paper offers the basis for considering new policy perspectives on FDI incentives and suggests new approaches for modeling the mechanisms through which domestic firms can experience productivity gains from their interaction with foreign counterparts in a globalized business environment.

KW - Industrial and Manufacturing Engineering

KW - Management Science and Operations Research

KW - Economics and Econometrics

KW - General Business, Management and Accounting

U2 - 10.1016/j.ijpe.2022.108546

DO - 10.1016/j.ijpe.2022.108546

M3 - Journal article

VL - 251

JO - International Journal of Production Economics

JF - International Journal of Production Economics

SN - 0925-5273

M1 - 108546

ER -