Publication

This paper focuses on the role of absorptive capacity in determining whether or not domestic firms benefit from productivity spillovers from foreign direct investment (FDI) using establishment level data for the UK. The authors allow for different effects of FDI on establishments located at different quantiles of the productivity distribution. They find that absorptive capacity matters for productivity spillover benefits and argue for a u-shaped relationship between productivity growth and FDI interacted with absorptive capacity. Moreover, they analyze the impact of changes in absorptive capacity on establishments' ability to benefit from spillovers.