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ween 1993 and 1997, and Kathuria (2000) for India also find negative spillover effects. Sadik and Bolbol (2001) fail to support the productivity spillover effects from foreign firms to local firms. Kinoshita (2001) uses data set for 1217 manufacturing firms for the Czech Republic in the period 1995-1998. She finds no significant technology spillover effect of joint ventures or FDI on productivity growth neither within the firm nor within the industry.

On the other hand, a number of studies for the host developing countries provide a positive effect of FDI on the productivity of local firms. Using a cross-section data for Indonesia at the firm level data, Blomstrom and Persson (1983), Blomstrom (1986), Blomstrom and Wolff (1994), and Kokko (1994, 1996) find evidence of positive spillovers from FDI. Haskel et al. (2002) examines productivity spillovers from FDI to domestic firms by using a firm level panel data covering U.K. manufacturing from 1973 to 1992, they find a significantly positive correlation between a domestic firm’s productivity and foreign firm activities in the manufacturing industry. In addition, these studies provide evidence of positive horizontal spillovers in host developing countries.

However, Blomstrom et al (2000) point out there is a limitation of empirical studies analyzing vertical spillovers (backward and forward linkages). Scoors and Tol (2001) analyze the influence of FDI on labour productivity of domestic firms in Hungary by using data for 1084 firms in 1997 and 1998, they find that backward linkage spillovers are negative but forward linkage spillover are positive. However, based on a firm level panel dataset for Lithuania, Javorick (2004) tests productivity spillovers taking place through backward and forward linkages and shows that backward linkage spillovers are positive and forward linkages are negative in the study.

In the past two years there have been several UK studies, using newly-available data on the UK manufacturing sector. Driffield and James (2007) examine the effects of FDI into the United Kingdom on domestic productivity, and find that different types of FDI have markedly different productivity spillover effects. Liu et al. (2000), using 48 3-digit UK industries for the period 1991-96, find that the presence of multinational firms has a significant positive impact on the productivity in the local UK manufacturing firms. Using 2- digit industry level panel data for 1983-92, Hubert and Pain (2001) investigate the impact of direct investment by foreign firms on the technical progress and labour productivity in the UK and find that foreign firms have a significant positive effect on the level of technical efficiency in domestic firms. Girma et al. (2001) investigate whether the presence of foreign firms in a sector raises the productivity of domestic firms using a firm-level panel data set in the UK manufacturing industry for the period 1991-96. They find no evidence of productivity spillovers on average. However; their results show evidence of spillovers where firms are in industries with high levels of import competition or skills.

It is clear that the empirical studies on technology spillovers from FDI provide different experiences among host countries. Mixed evidence from these empirical studies points out that technology spillover from FDI depends on local firms and host country specific characteristics which are the main reasons to