Multinationals and domestic firms in France: who gains from knowledge spillovers?

This paper aims to evaluate the direction, nature, and magnitude of spillovers between foreign-owned firms and French firms from firm-level panel data. We estimate production functions at the firm level using the recent structural techniques suggested in Ackerberg et al. (2006). From our results, three main conclusions can be drawn. First, spillovers are at work in all research-intensive sectors, although they have very weak effects in the less knowledge-based sectors. Second, foreign-owned firms belonging to high- and medium-technology manufacturing industries that are set up in France benefit from horizontal spillovers, suggesting a technology sourcing activity of foreign multinationals. Third, inward foreign investment increases the total factor productivity of French firms supplying inputs to multinationals (backward spillovers) only in high- and medium-technology manufacturing industries and after 4 years.