Spillover Effects of Foreign Direct Investment: New Evidence from Italy

Abstract

This chapter investigates the relationship between foreign direct investment (FDI) and the productivity of Italian provinces over the period 2003-2009. Our findings suggest that recipient local economies are on average more productive when they receive FDI. Nevertheless, our estimates reveal that spillover effects are solidly concentrated in provinces with the highest absorptive capacities, thus reinforcing the notion that local competences play a crucial role to capture the benefits associated with inward FDI. This evidence suggests that policy measures for the attraction of FDI should necessarily be accompanied by interventions aimed at generating adequate skills and competences at the local level.