Does Foreign Ownership in Firms Increase Productivity and create Productivity Spillover Effects?

This thesis theoretically and empirically investigates the impact of foreign investment and foreign ownership on firm and industry productivity. A general equilibrium model with firm heterogeneity, employed by Melitz(2003), suggests a positive direct and indirect impact of foreign ownership on increase in sales through the transfer of technology, know-how and efficiency in production. The empirical analysis, employing firm level data on East European and Central Asian countries over the period 2002, 2004, 2007, 2009 confirms, in a limited number of cases, a significantly positive direct and indirect impact of foreign ownership on firm’s and industry’s sales. However, no significant evidence has been found in favor of an additional indirect effect of foreign ownership on joint ventures in an industry. The statistical results in general, when found, support the theoretical hypothesis. This thesis and the research are a fresh start for analyzing the effects of foreign investments in Eastern European and Central Asian countries