Local technological capability and productivity spillovers from FDI in the Uruguayan manufacturing sector

This article examines intra-industry spillovers from FDI in Uruguayan manufacturing plants in 1988, to determine whether differences in the technology gap between locally-owned plants and foreign affiliates have any impact on the relation between local productivity and foreign presence, We find a positive and statistically significant spillover effect only in a sub-sample of locally-owned plants with moderate technology gaps vis-a-vis foreign firms. Our interpretation is that there are firm-specific differences in the ability to absorb spillovers, and that these may explain some of the contradictory findings of earlier spillover studies.