Events at CERGE-EI

Dr. Christian Fons-Rosen

Universitat Pompeu Fabra, Barcelona, Spain

Abstract: This paper uses the entry of foreign firms into Central and Eastern Europe (CEE) during the 1990s to analyse the effect on knowledge flows and identify the underlying transmission mechanism. Using patent citations as a measure of knowledge flows, the project analyses whether inventors located in CEE cite patents developed by foreign firms more often after these companies have established themselves in CEE. Apart from using patents data together with firm-level information from Amadeus/Orbis, I also collect data on foreign bidders of privatisation cases resolved by a public tender during the 1990s. Under the identifying assumption that losing bidders form a valid counterfactual to winning bidders, the paper estimates a difference-in-difference effect of FDI on citations received. After the privatisation case is resolved, winning bidders experience a 20% increase in citations received compared to losing bidders. To identify the mechanism driving knowledge flows, I build a panel of patent inventors and track them over time. Results show that foreign multinationals that reallocate inventors towards their R&D labs in CEE experience a further increase in citations received.

Full Text: “Knowledge Flows Through FDI: the Case of Privatisations in Central and Eastern Europe”