Do domestic firms benefit from direct foreign investment? Evidence from Venezuela

Governments often promote inward foreign investment to encourage technology "spillovers "from foreign to domestic firms. Using panel data on Venezuela n plants, we find that foreign equity participation is positively correlate d with plant productivity (the "own-plant" effect), but this relationship i s only robust for small enterprises. We then test for spillovers from joint ventures to plants with no foreign investment. Foreign investment negative ly affects the productivity of domestically owned plants. The net impact of foreign investment, taking into account these two offsetting effects, is q uite small. The gains from foreign investment appear to be entirely capture d by joint ventures. (JEL F2, O1, O3).