Determinants of Horizontal Spillovers from FDI: Evidence from a Large Meta-Analysis

SummaryThe voluminous empirical research on horizontal productivity spillovers from foreign investors to domestic firms has yielded mixed results. In this paper we collect 1,205 estimates of spillovers and examine which factors influence spillover magnitude. Our results suggest that horizontal spillovers are on average zero, but that their sign and magnitude depend systematically on the characteristics of the domestic economy and foreign investors. Foreign investors who form joint ventures with domestic firms and who come from countries with a modest technology edge create the largest benefits for the domestic economy.

► We meta-analyze horizontal spillovers from FDI. ► Spillovers are zero on average. ► We use Bayesian model averaging to identify spillover determinants. ► Large technology gap is associated with less spillovers. ► Joint ventures create more spillovers than fully foreign-owned projects.