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Differencing from previous studies on Foreign Direct Investment (FDI) spillovers to domestic enterprises which mainly focus on productivity, in this paper the authors take a different perspective by analyzing the impacts of FDI to technical efficiency of domestic firms. The paper goes beyond the current literature to shed some light on the spillover effects of FDI to technical efficiency of small and medium enterprises in a developing country. By exploiting a firm-level panel dataset and using SFA models following Battese and Coelli (1995), the paper is able to analyze horizontal spillovers through imitation and competition and labour mobility as well as vertical spillovers through backward and forward linkages on technical efficiency.
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