Catching-up to foreign technology? Evidence on the bVeblen–GerschenkronQ effect of foreign investments
Giovanni Peri and Dieter Urban, 2006.
The presence of foreign multinational enterprises may benefit local economies. In particular, highly productive foreign-owned firms may promote technological catch-up of local firms. Such channel of spillovers is defined as "Veblen-Geschenkron" effect of Foreign Direct Investments and is analyzed in this article. Rather than the overall density of foreign-owned plants in a region or sector, it is their productivity advantage that determines the positive effect on domestic firms in geographical and technological proximity. We test this hypothesis using new firm-level data for German and Italian manufacturing firms during the 90's. We find evidence of a significant Veblen-Gerschenkron effect which is robust to different ways of measuring total factor productivity (TFP) of firms and to different empirical specifications.
This paper was written with Dieter Urban, a very fine economist and friend. Dieter passed away in March 2011 after a very brave battle with a deadly disease. I want to remember and cherish Dieter's life and acknowledge the great time we had doing research together and writing this paper. Thanks Dieter! I will keep you in my heart.