Foreign Direct Investment as a Catalyst for Domestic Firm Development: The Case of Sri Lanka

Published on Jun 2, 2017
路 DOI :10.18356/a4a49e57-en
Palitha Konara3
Estimated H-index: 3
(University of Huddersfield),
Yingqi Wei20
Estimated H-index: 20
(University of Leeds)
Foreign direct investment (FDI) carried out by multinational enterprises (MNEs) is recognized as a mechanism through which domestic firms can learn and improve competitiveness. Different from the extant literature which tends to focus on the aggregate effects of FDI in Sri Lanka, we investigate the role of FDI for domestic firm development at the firm level. Using World Bank Enterprise Survey data supplemented by industry data, preliminary investigation reveals that, compared to domestic firms, MNEs are larger, more productive, more profitable, and more active in R&D. MNEs hire higher proportion of skilled workers and undertake more in-house training programs. They are also more export-oriented but rely more on inputs of foreign origin. The gaps between foreign and domestic firms indicate the potential that Sri Lankan firms can learn from MNEs/FDI. The econometric study on firm-level productivity indicates positive direct effects and negative spillover effects of FDI on domestic firms. The findings have important policy implications.
  • References (0)
  • Citations (1)
馃摉 Papers frequently viewed together
5 Citations
4 Citations
7 Citations
78% of Scinapse members use related papers. After signing in, all features are FREE.
Cited By1
#1Palitha Konara (University of Sussex)H-Index: 3
#2Yong Tan (University of Huddersfield)H-Index: 10
Last. Jill Johnes (University of Huddersfield)H-Index: 25
view all 3 authors...
Abstract The inquiry into whether foreign firms are more productive than local firms has been one of the key research questions among international business scholars. We extend this line of research by addressing the heterogeneity among different performance measures. In this study, we examine the impact of foreign direct investment (FDI) on four internal measures of efficiency, i.e. overall technical, pure technical, scale and cost efficiencies, as well as an external measure of efficiency, i.e...
2 CitationsSource