Spillovers from Multinationals to Heterogeneous Domestic Firms: Evidence from Hungary


  • The authors acknowledge helpful comments on an earlier draft from three anonymous referees, Karolina Ekholm, Lászlo Halpern, Beata Javorcik, Gábor Kátay, Gábor Kézdi, Kala Krishna, Gianmarco Ottaviano, Balázs Muraközy, Zoltán Wolf, Álmos Telegdy and seminar participants at the EIIE 2007 (Ljubljana), the EEA 2007 (Budapest), ETSG 2007 (Athens), the IAW workshop (Tübingen), and the conference FDI and the Consequences 2007 in Ghent. This paper was partly written when Gábor Békés was visiting the University of Paris 1. We are thankful to CEU and IEHAS for financing several research trips. This research was supported by a grant from the CERGE-EI Foundation under a Global Development Network (GDN) programme. Farid Toubal and Jörn Kleinert would like to acknowledge financial support from the ANR/DFG ‘FDI in Services’. All opinions expressed are those of the authors and have not been endorsed by CERGE-EI or the GDN.


Firms cluster their economic activities to exploit technological and informational spillovers from other firms. Spillovers from multinational firms can be particularly beneficial to firms in less developed economies, because technological superiority and management expertise of foreign multinational firms yield various opportunities for learning. Yet, the importance of foreign firms’ spillovers might vary with respect to two key features of domestic firms: their productivity level and their export status. In line with theories on the absorptive capacity of firms, we argue on the basis of an empirical analysis of Hungarian firms that larger and more productive firms are more able than smaller firms to reap spillovers from multinationals. However, the export status is found to be of minor importance once higher productivity is controlled for.