Does Foreign Ownership Matter? Russian Experience

The purpose of the paper is two-fold. The paper compares productivity of Russian firms that received foreign direct investments, and fully domestically owned firms. It also analyses spillovers from foreign-owned firms to domestic firms. Foreign firms are found to be more productive than the domestic ones, however, poor progress of reform in the region negatively affects productivity of foreign-owned firms. At the same time, there are positive spillovers between foreign-owned and domestic firms. This effect if particularly strong in the case of medium-sized firms (between 200 and 1000 employees), while spillovers on small firms are negative. The stock of human capital in the region is one of the main factors, which helps domestic firms to benefit from the entry of foreing firms.