Productivity Spillovers from Multinational Corporations in the Portuguese Case: Evidence from a Short Time Period Panel Data

Abstract

Empirical evidence on productivity spillovers - a concept that embodies the fact that foreign enterprises own intangible assets which can be transmitted to domestic firms, thus raising their productivity level - is ambiguous. With a panel data set at the firm level for the Portuguese manufacturing industry, we aim to uncover the possibility that the choice of statistical techniques will have profound effects on evidence of spillovers diffusion. We will consider the panel data models commonly used in the literature and the recent and more robust Extended GMM technique, specially devised for panels with a small number of time periods. We find that positive spillovers occur only when the technologic gap between domestic and foreign firms is moderate. Though all methods agree on this result. there are differences worth to be noted, revealing that the traditional estimates can sometimes be misleading.Domestic firm productivity; multinational corporations; Portugal; technological spillovers; panel data; Extended GMM.