FDI spillovers at regional level: Evidence from Portugal

Abstract

This paper aims to establish whether geographical proximity between multinational and domestic firms is relevant to the occurrence of FDI spillovers, by considering both horizontal and vertical spillovers. Using data for Portugal, this hypothesis is confirmed. In the case of horizontal externalities, the impact is negative, probably due to the competition effect. Concerning vertical externalities, a positive impact through backward linkages is observed. Additionally, omission of the regional dimension provokes a bias on the estimation of the intra-sectoral effect at the national level. These results raise important implications for the economic policies aiming to attract FDI and promote regional development. Resumen Este artículo pretende establecer si la proximidad geográfica entre empresas multinacionales y domésticas es relevante para la existencia de spillovers de IED, considerando spillovers horizontales y verticales. Utilizando datos de Portugal, se confirma esta hipótesis. En el caso de externalidades horizontales, el impacto es negativo, probablemente debido al efecto de la competencia. Respecto a externalidades verticales, se observa un impacto positivo mediante vínculos hacia detrás. Adicionalmente, la omisión de la dimensión regional provoca un sesgo en la estimación del efecto intrasectorial a escala nacional. Estos resultados suscitan implicaciones importantes para las políticas económicas que pretendan atraer IED y fomentar el desarrollo regional.

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