Foreign direct investment spillovers and firms' access to credit

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Abstract

Using a unique data set from the Czech Republic for 1994-2003, this study examines the relationship between technological spillovers from foreign direct investment (FDI) and firms' access to external finance. The empirical analysis indicates that overall, Czech firms benefit little from technological spillovers from FDI. However, a closer look at the financing of domestic firms suggests that firms that have access to external finance enjoy larger benefits from the presence of foreign firms in their own industry or in downstream industries, through increased productivity. The results highlight the importance of financial-sector development and access to external financing to increasing the productivity and competitiveness of domestic firms through technological spillovers from FDI. Our finding suggests that well-developed financial markets may be needed in order to take full advantage of the benefits associated with FDI inflows.

Original languageEnglish (US)
Pages (from-to)801-809
Number of pages9
JournalApplied Financial Economics
Volume24
Issue number12
DOIs
Publication statusPublished - Jun 2014

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All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • FDI
  • access to finance
  • spillovers

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