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Abstract

Although developing and emerging market firms (southern MNCs) are increasingly engaged in outward FDI in European advanced economies, we have an incomplete and inconsistent understanding of whether, and under what conditions, this investment may benefit the local economy. Our paper addresses this issue by examining whether local firms may benefit from the entry and the presence of southern MNCs in services/construction industry. We argue that analyzing spillovers from southern MNCs needs to distinguish these effects according to how they take place as well as the technological characteristics of local knowledge receivers. Using firms-level data from Switzerland, we found that local firms need to upgrade their human capital to take benefit from the entry and presence of southern MNCs in their industry; otherwise the presence of southern MNCs reduces the productivity of local services/construction firms in Switzerland. No benefit is found from competition effects. Moreover, interactions between different technological capacities of local firms and the ways they benefit from spillovers from southern MNCs provide differences in spillover results.

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