Template-type: ReDIF-Paper 1.0
Author-Name: Gachino, Geoffrey
Author-Email: gachino@merit.unu.edu
Author-Workplace-Name: United Nations University,  Maastricht Economic and social
	 Research and training centre on Innovation and Technology
Title: Foreign direct investment and firm level productivity - A panel data
	 analysis
Abstract: This paper uses panel data to examine the effect of foreign presence 
	 on firm level productivity in the Kenyan manufacturing industry 
	 employing "traditional" and "recent" methodologies both based on 
	 production function framework. A detailed comparative behaviour 
	 between foreign and local indigenous firms showed that foreign firms 
	 dominated in virtually all the economic activities including 
	 productivity performance. Analysis of productivity determinants 
	 following traditional approach indicated a statistically significant 
	 role played by foreign presence on firm level total factor 
	 productivity thus, supporting spillover occurrence argument. However, 
	 results based on recent methodologies showed no effect of foreign 
	 presence on firm level total factor productivity hence failing to 
	 support spillover occurrence dictum. These results indicate that use 
	 of different methodologies even within the same theoretical framework 
	 can result in divergent findings. This notwithstanding, the paper 
	 further argues that use of productivity based methodologies largely 
	 masks the nature, actual processes and mechanisms through which 
	 spillovers occur. The paper therefore advocates for a "paradigm shift" 
	 in the spillover analysis techniques and recommends a broader approach 
	 with particular emphasis on technological innovations which takes into 
	 consideration learning, capability building and innovation.
Classification-JEL: O33, F21, C33, O16, D24, O55
Keywords: International Economic Relations, Foreign Direct Investment,
	 Technology Transfer, Total Factor Productivity, Technological Change, 
	 Innovations, Kenya 
Series: UNU-MERIT Working Papers
Creation-Date: 2007
Number: 016
File-URL: http://www.merit.unu.edu/publications/wppdf/2007/wp2007-016.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2007016