Transmission channels matter: Identifying spillovers from FDI

Binyam Afewerk Demena, Mansoob Murshed

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29 Citations (Scopus)
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The empirical literature on the spillovers of foreign direct investment (FDI) has so far not analysed the well-established theoretical transmission channels through which FDI impacts on domestic firms. This paper shows how channels of transmission matter for productivity spillovers from FDI by providing more fuller and nuanced picture of the effects. We analyse a panel of eight sub-Saharan Africa countries spanning the period 2006–2014 and demonstrate the empirical relevance of distinguishing three channels – demonstration, labour mobility, and competition. We provide measures of these effects and also show that the size, significance, and sign of spillover effects depend on the local absorptive capacity, technology levels, geographical proximity, and foreign ownership structure. Overall, results suggest that demonstration spillovers are large and economically significant, whereas the patterns of labour mobility and competition spillovers are not stable across the various specifications and measures. Finally, the analysis involves several measures of further investigations and robustness checks. Results are robust to the construction of spillover and outcome variables, the introduction of additional explanatory variables and an alternative estimation method. KEYWORDS: FDI, spillovers, demonstration, labour mobility, competition, sub-Saharan Africa JEL Codes: D62, F23, J24 Log in via your institution Shibboleth OpenAthens Log in to Taylor & Francis Online Username Enter your email Password Enter your password Forgot password? Remember Me Log in Or purchase it * Add to cart Issue Purchase 30 days access for GBP 228.00 Add to cart Article Purchase 24 hours access for GBP 30.00 * Local tax will be added as applicable People also read Article Causality nexus of exports, FDI and economic growth of the ASEAN5 economies: evidence from panel data analysis Fayyaz Ahmad et al. The Journal of International Trade & Economic Development Latest Articles Published online: 22 Jan 2018 Sample our Development Studies journals, sign in here to start your access, latest two full volumes FREE to you for 14 days 14 days FREE online access to our Development titles
Original languageEnglish
Pages (from-to)701-728
Number of pages28
JournalThe Journal of International Trade & Economic Development
Issue number7
Publication statusPublished - 27 Feb 2018


  • FDI
  • sub-Saharan Africa
  • competition
  • labour mobility
  • demonstration
  • spillovers


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