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Contents Introduction

While the literature has explored the relationship between FDI and productivity, a consensus has yet to be reached regarding FDI’s impacts on the productivity of local companies in developing host countries. Motivated by various results in the literature, this paper tries to specify the conditions under which industries enjoy horizontal, backward, or forward technology spillovers. Previous works have begun to consider the possibility that technology spillovers may vary depending on foreign affiliate characteristics. Our analysis extends this research and sheds light on the necessity of distinguishing local establishment characteristics when discussing potential benefits from FDI. The results show that horizontal and backward spillovers can occur simultaneously when hosting FDI. However, in order to enjoy forward spillovers, the host government needs to attract FDI in industries different from the industries that enjoy horizontal and backward spillovers.