Skip to main navigation menu Skip to main content Skip to site footer

Productivity Gap: A Chance or an Obstacle in Absorbing Benefits from FDI in a Host Country



Objective: The objective of this study was to determine the relationship between labour productivity in Poland, the presence of foreign direct investment and productivity gap between Poland and the EU-15.

Research Design & Methods: Panel data techniques including pooled, fixed and random effects models, as well as diagnostic tests were used in this study. The idea was to find the relation between labour productivity measured by gross value added per employee (or hours worked) and the degree of the penetration of foreign capital.

Findings: While investment decisions regarding the choice of a country are determined by the size of the target market, the distance is still a negative factor in the creation of FDI volume. Additionally, the backwardness of business or its relative proximity in terms of labour productivity in relation to the EU-15 is an unfavourable factor when it comes to the improvement of productivity.

Implications & Recommendations: The results that we have obtained confirm the hypothesis that there exists an optimal level of productivity gap implying high absorption benefits of FDI presence. Moreover, an increasing involvement of foreign investors in different sectors implies both higher productivity of these sectors and the gap reduction. This may prove that too small or too huge productivity gap is an obstacle to the absorption of benefits from the presence of foreign capital to boost productivity by local firms.

Contribution & Value Added: The study contributes to the observation in the existing literature that an increasing accumulation of FDI is accompanied by the progressive convergence of productivity between the UE-15 and Poland almost across all sectors. The heterogeneity of the phenomenon is noticeable on the sectoral level, which seems to be unsaid in the majority of empirical studies basing on national-aggregated data.



internationalisation, productivity gap, FDI, panel analysis, sectoral study


Author Biography

Liwiusz Wojciechowski

Bachelor of International Trade, Econometrics and Computer Sciences, Spatial Planning (University of Gdańsk, Poland); Master in Econometrics and Computer Sciences, International Finance and Banking (University Gdańsk, Poland); Currently PhD student at the Faculty of Management of the Cracow University of Economics, Poland.


  1. Aitken, B.J., & Harrison, A. (1999). Do domestic firms benefit from direct foreign investment? Evidence from Venezuela. American Economic Review, 89(June), 605-618. doi: 10.1257/aer.89.3.605
  2. Azeroual, M. (2016). The Impact of Foreign Direct Investment on the Productivity Growth in the Moroccan Manufacturing Sector: Is Source of FDI important?. Journal of International and Global Economic Studies, 9(1), 29-45.
  3. Baltagi, B.H. (2005). Econometric Analysis of Panel Data (3rd ed.). Chichester: John Wiley & Sons, Ltd.
  4. Baltabaev, B. (2014). Foreign Direct Investment and Total Factor productivity Growth: New Macro-Evidence. The World Economy, 37(1), 311-334.
  5. Blomström, M., Kokko, A., & Zejan, M. (1994). Host country competition, labour skills, and tech-nology transfer by multinationals. Review of World Economics, 130(3), 521-533.
  6. Bouoiyour, J. (2003). Labor Productivity, Technological Gap and Spillovers: Evidence from Moroccan Manufacturing Industries (WPCATT Working papers). University of Pau.
  7. Cieślik, A. (2005). Geografia inwestycji zagranicznych. Przyczyny i skutki lokalizacji spółek z udzia-łem kapitału zagranicznego w Polsce. Warszawa: Wydawnictwo Uniwersytetu Warszawskie-go.
  8. Ciołek, D., & Golejewska A. (2006). Dyfuzja produktywności jako efekt pośredni FDI w polskim przemyśle przetwórczym w latach 1993-2002. Prace i Materiały Wydziału Zarządzania UG Ekonometria, 4(3), 41-52.
  9. Ciołek, D., & Golejewska, A. (2005). Wpływ bezpośrednich inwestycji zagranicznych na polski przemysł przetwórczy w oparciu o dane panelowe z lat 1993-2002. Materiały zgłoszone na IX Ogólnopolskie Seminarium Naukowe, Dynamiczne Modele Ekonometryczne. Toruń: Wydaw-nictwo UMK.
  10. Damijan, J.P., Knell, M., Boris, M., & Rojec, M. (2003). Technology Transfer through FDI in Top-10 Transition Countries: How Important are Direct Effects, Horizontal and Vertical Spillovers? (William Davidson Working Paper no. 549). Retrieved on April 4, 2017 from
  11. Damijan, J.P., Rojec, M., Majcen, B., & Knell M. (2013). Impact of Firm Heterogeneity on Direct and Spillover Effects of FDI: Micro Evidence from Ten Transition Countries. Journal of Com-parative Economics, 41(3), 895-922.
  12. Demeti, A., & Rebi, E. (2014). Foreign direct investments (FDI) and Productivity in Albania. Inter-disciplinary Journal of Research and Development, I(1), 7-14.
  13. Djankov, S., & Hoekman, B. (2000). Foreign Investment and Productivity Growth in Czech Enter-prises. World Bank Economic Review, 14(1), 49-64.
  14. Dimelis, P.S. (2005). Spillovers from Foreign Direct Investment and Firm Growth: Technological, Financial and Market Structure Effects. The Economic of Business, 12(1), 85-104.
  15. Dunning, J.H. (1973). The determinants of international production. Oxford Economic Papers, 25(3), 289-336.
  16. Dunning, J.H. (1992). Multinational Enterprise and the Global Economy. Wokingham: Addison Wesley.
  17. Findlay, R. (1978). Relative Backwardness, Direct Foreign Investment and the Transfer of Technol-ogy: A Simple Dynamic Model. Quarterly Journal of Economics, 92(1), 1-16. doi: 10.2307/1885996
  18. Girma, S., Gong, Y., Gorg, H., & Lancheros, S. (2014). Estimating Direct and Indirect Effects of Foreign Direct Investment on Firm Productivity in the Presence of Interactions between Firms (Kiel Working Papers Series no. 1961). Retrieved on April 4, 2017 from
  19. Glass, A., & Saggi, K. (1998). International Technology Transfer and the Technology Gap. Journal of Development Economics, 55(2), 369-398.
  20. Golejewska, A. (2009). Productivity Spillovers from Foreign Direct Investment in Polish Manufac-turing 1993-2006. Analizy i Opracowania KEIE UG, 2, 3-16.
  21. Görg, H., & Strobl, E. (2004). Foreign direct investment and local economic development: Beyond productivity spillovers (GEP Research Paper no. 11). Nottingham, UK: The University of Not-tingham.
  22. Görg, H., & Greenaway, D. (2004). Much ado about nothing: do domestic firms really benefit from foreign direct investment. World Bank Research Observer, 19(2), 171-198. doi: 10.1093/wbro/lkh019, 171-197
  23. Haddad, M., & Harrison A.E. (1993). Are There Positive Spillovers from Direct Foreign Investment? Evidence Panel Data for Marocco. Journal of Development Economics, 42(1), 51-74.
  24. Havranek, T., & Irsova, Z. (2010). Meta-Analysis of Intra-Industry FDI Spillovers: Updated Evidence. Finance a úver-Czech Journal of Economics and Finance, 60(2), 151-174.
  25. Herzer, D. (2017). Foreign direct investment and total factor productivity in Bolivia. Applied Eco-nomics Letters, 24(6), 399-403.
  26. Hussain, M.E., & Haque, M. (2016). Foreign Direct Investment, Trade, and Economic Growth: AN Empirical Analysis of Bangladesh. MDPI Economies, 4(2), doi:10.3390/economies4020007
  27. Javorcik, B. (2004). Does foreign direct investment increase the productivity of domestic firms? In search of spillovers through backward linkages. American Economic Review, 94(3), 605-627.
  28. Javorcik-Smarzyńska, B., Saggi, K., & Spatareanu, M. (2004). Does it matter where you come from? Vertical spillovers from foreign direct investment and the nationality of investors (The World Bank Policy Research Working Paper Series no. 3449). Retrieved on April 4, 2017 from
  29. Khalifah, N.A., Salmah, M.S., & Radziah A. (2015). FDI productivity spillovers and the technology gap in Malaysia’s electrical and electronic industries. Asian Pacific Economic Literature, 29(10), 142-160.
  30. Karpaty, P., & Lundberg L. (2004). Foreign Direct Investment and Productivity Spillovers in Swedish Manufacturing (Working Paper Series no. 2). Örebro, Sweden: The Örebro University.
  31. Kokko, A. (1996). Productivity spillovers from competition between local firms and foreign affili-ates. Journal of International Development, 8(4), 517-530, doi: 10.1002/(SICI)1099-1328(199607)8:4<517::AID-JID298>3.0.CO;2-P
  32. Kokko, A., Tansinis, R., & Zelman, M.C. (1996). Local Technological Capability and Productivity Spillovers from FDI in the Uruguayan Manufacturing Sector. Journal of Development Studies, 32(4), 602-611.
  33. Kolasa, M. (2008). How does FDI inflow affect productivity of domestic firms? The role of horizon-tal and vertical spillovers, absorptive capacity and competition. The Journal of International Trade & Economic Development. An International and Comparative Review, 17(1), 155-173.
  34. Konings, J. (2001). The effects of foreign direct investment on domestic firms. Evidence from firm-level panel data in emerging economies. Economics of Transition, 9(3), 619-633.
  35. Meyer, K.E., & Sinani, E. (2009). When and Where Does Foreign Direct Investment Generate Posi-tive Spillovers? A Meta-Analysis. Journal of International Business Studies, 40(7), 1075-1094. doi: 10.1057/jibs.2008.111
  36. Ozawa, T. (1992). Foreign direct investment and economic development. Transnational Corpora-tion, 1, 6-8.
  37. Pandya, S.S. (2016). Political Economy of Foreign Direct Investment: Globalized Production in Twenty-First Century. Annual Review of Political Science, 45, doi: 10.1146/annurev-polisci-051214-101237
  38. Pawłowska, E., & Wojciechowski, L. (2015). Znaczenie napływu ZIB w kontekście wzrostu i rozwoju gospodarczego na przykładzie krajów Grupy Wyszehradzkiej. In K. Woźniak (Ed.), Narzędzia analityczne w naukach ekonomicznych (pp. ). Kraków: Wyd. MFiles.
  39. Roy, S. (2016). Foreign direct investment and total factor productivity growth: does distance from technology frontier matter?. Global Business and Economics Review, 18(2). Retrieved on April 4, 2017 from
  40. Sjoholm, F. (1999). Technology gap, competition, and spillovers from FDI: evidence from estab-lishment data. Journal of Development Studies, 36(1), 55-73.
  41. Stančík, J. (2007). Horizontal and Vertical Spillovers: Recent Evidence from the Czech Republic. CERGE-EI Working Papers Series, 340.
  42. Teece, D.J. (1977). Technology transfer by multinational firms: The resource cost of transferring technological know-how. The Economic Journal, 87(346), 242-261.
  43. Szczepkowska-Flis, A. (2008). Wewnątrzbranżowe efekty spillover bezpośrednich inwestycji zagra-nicznych. Ruch Prawniczy, Ekonomiczny i Socjologiczny, LXX(1), 171-184.
  44. Tondl, G., & Fornero, J.A. (2010). Sectoral productivity and spillover effects of FDI in Latin America (FIW Working Paper series no. 053). Retrieved on April 4, 2017 from
  45. Wach, K. (2015). Entrepreneurship Without Borders: Do Borders Matter for International Entrepre-neurship. Problemy Zarządzania, 2(51), 82-92.
  46. Wach, K., & Wojciechowski, L. (2014). The factors of outward FDI from V4 countries from the perspective of the EU and the EMU membership: A panel gravity model approach. Acta Uni-versitatis Lodziensis Folia Oeconomica, 5(307), 157-170.
  47. Wach, K., & Wojciechowski, L. (2016a). Determinants of Inward FDI into Visegrad Countries: Em-pirical Evidence Based on Panel Data for the Years 2000-2012. Economics and Business Re-view, 2(1), 34-52. doi: 10.18559/ebr.2016.1.3
  48. Wach, K., & Wojciechowski, L. (2016b). Inward FDI and entrepreneurship rate: Empirical evidence on selected effects of FDI in Visegrad countries. Journal of Economics and Management, 24(2), 42-54. doi: 10.22367/jem.2016.24.04
  49. Żukowska-Gagelman, K. (2000). Productivity spillovers from foreign direct investment in Poland. Economic Systems, 24(3), 223-256.


Download data is not yet available.