Abstract:

This study examines the direct and indirect or spillover effects (horizontal and vertical) of FDI with special emphasis on the backward spillover effects. My main purpose is to examine whether the effect of backward spillovers generated by export oriented foreign owned firms is larger on productivity of domestic firms than backward spillover effect generated by domestic oriented foreign owned firms by using firm-level data for the years 2003-2011. With this purpose, value added and total factor productivity equations with two different measures of backward spillover effects for Turkish manufacturing industry firms are estimated by using the panel data method. My empirical results are consistent with the existence of positive horizontal and vertical spillovers of FDI. My estimation results also show that the backward spillover generated by export oriented foreign owned firms is larger than the backward spillover generated by domestic oriented foreign owned firms.

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