ABSTRACT
The last two decades have witnessed an impressive growth of the body of empirical research on intra-industry FDI productivity effects in host economies. An initial surge of cross-sectional studies produced evidence of the occurrence of FDI externalities of a positive nature. Findings from more recent studies, often estimating FDI effects in panel data settings, are much more diverse, ranging from positive to insignificant to negative externality effects. As a result, opinions on this type of FDI externalities differ markedly. In response to this impasse, several studies have started to include assessments of possible determinants of these FDI effects. In particular, several studies have focused on indentifying the effect of the level of absorptive capacity of domestic firms in a host economy, by relating the level of technological differences between FDI and domestic firms to the occurrence of FDI spillovers. More recently, another line of investigation has started to develop on the relation between geographical space and FDI externalities, in an attempt to capture a broader range of FDI spillovers and to investigate whether these FDI effects are influenced by geographical dimensions.
