There is a large and growing literature that examines the relationship between foreign direct investment (FDI) and the economic performance of local firms. The traditional argument is that the productivity of local establishments benefits from the presence of foreign firms through the gradual dissemination of superior knowledge and technology. Such an argument is often used to justify the, often aggressive, FDI-seeking policies of developing country governments (see e.g. Blomstrom and Kokko, 1998; Aitkin and Harrison, 1999).
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