Determinant Factors of Pecuniary Externalities

Abstract

This paper relates to the literature on pecuniary externalities from FDI. Their transmission mechanism is complex, because pecuniary externalities may cause knowledge externalities and inversely. Moreover, each type of externality, or a combination of both, may increase firm productivity. Thus, so far, the factors determining pecuniary externalities are not fully exploited. As a result, all the potential effects of FDI on firm productivity remain to explain. We contribute to the literature by providing a broader picture of the determinant factors of pecuniary externalities; through their classification along the lines of theory of heterogeneous firms, and by relating their effects.