IMPORTED CAPITAL INPUT, ABSORPTIVE CAPACITY, AND FIRM PERFORMANCE: EVIDENCE FROM FIRM-LEVEL DATA

Authors

  • MAHMUT YASAR

    1. Yasar: Assistant Professor of Economics, Department of Economics, University of Texas, Arlington, 701 S. West Street, Arlington, TX 76019. Phone 817-272-3290, Fax 817-272-3145, E-mail myasar@uta.edu; Assistant Professor of Economics, Emory University, Department of Economics, Atlanta GA 30322.
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    • I am indebted to the co-editor and an anonymous referee for their constructive and useful suggestions. I wish to acknowledge helpful comments by Gary Ferrier, Takao Kato, Fabio Mendez, Kaz Miyagiwa, Catherine J. Morrison Paul, Jigna Sampat, Zhizhong Shan, seminar participants at the University of Arkansas, and participants at the International Industrial Organization conference, North American Productivity Workshop, and Southern Economic Association meetings on the earlier version of the article. I also would like to thank the World Bank Enterprise Surveys Staff for helpful discussions about the data.


Abstract

Importing capital inputs has been recognized as a critical channel for technology transfer across countries. We examine whether and to what extent the productive impact of imported capital varies with firms' abilities to absorb new technologies using ordinary least squares, instrumental variable, and threshold regression estimators. We find that firms with higher absorptive capacity gain significantly more from importing foreign capital. Our results also suggest a threshold for such benefits. Furthermore, the productive contribution of skilled labor is significantly higher in firms that import foreign capital. Developing policies to augment absorptive capacity will help firms in developing countries to realize benefits associated with imported capital. (JEL F14, D24, L24, O33)

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