Spatial dependence, foreign investment and productivity spillovers in new EU member states

This paper presents new empirical evidence on the impact of foreign direct investment (FDI) technology spillovers on the productivity of domestic firms in manufacturing and services in Central and East European regions over the period 2007–11. The complex impact of FDI is separated into direct and indirect effects while accounting for spatial feedback effects. Findings suggest that FDI presence generates negative intra- and interregional market-stealing effects on direct rivals and positive spillovers on downstream firms. The effects are larger from FDI in neighbouring regions and increase with distance.