Horizontal and backward Foreign Direct Investment spillovers: Evidence from manufacturing firms in Nigeria

Abstract

In the last few decades, developing countries across the globe in Africa, Asia, and Latin America have regarded Foreign Direct Investment (FDI) as a good source of capital and technology to fast-track industrial development. In pursuit of this, drastic policy changes in favour of FDI inflows, especially into the manufacturing sectors, were implemented by developing countries, including Nigeria. This has drawn the attention of many researchers; hence, several studies have examined the FDI spillover effects on the productivity of domestic firms in different countries. However, we observe a paucity in FDI spillover studies in the manufacturing sector in Nigeria. Distinct from previous studies in Nigeria, this study is inspired by the standard methodology suggested in the literature by Javorcik (2004) and constructs the horizontal and backward spillover variables to examine the FDI spillover effects.