FDI spillovers in the Czech Republic: takeovers vs. greenfields

This paper analyzes the effects of foreign direct investment on the sales growth rate of domestic companies in the Czech Republic.

This paper analyzes the effects of foreign direct investment on the sales growth rate of domestic companies in the Czech Republic. Using firm-level panel data from 1995 to 2005, it studies both horizontal and vertical spillovers with respect to two kinds of foreign investment – takeovers and greenfields. This is the first paper applying this framework on firm level. The study allows also for the lagged nature of these spillovers. The results suggest that the sales growth rates of domestic companies mostly decrease in the presence of foreign companies, especially in upstream sectors. The impact through horizontal spillovers is mixed – positive from foreign takeovers, negative from greenfields. Positive forward spillovers are present mainly in recent years. Time sensitivity is revealed for horizontal as well as vertical spillovers.

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