This study measures the effect of foreign direct investment (FDI) on the productivity of local firms. Unlike earlier studies, our empirical approach does not require that FDI manifests immediate or permanent effects. We find that foreign entry initially affects productivity of local competitors...

This study analyzes the dynamic effect of FDI on local firms’ productivity by relaxing the standard implicit assumption that technological spillovers are immediate and permanent. We find that the entry of majority foreign owned firms has a short run negative effect on the productivity of local...