This paper explores the relationship between foreign direct investment and the productivity of host country domestic firms. Using firm-level data collected by the Tunisian National Statistic Institute during the period 1997- 2007 in six manufacturing industries, we study whether the presence of foreign firms produces technology spillovers on domestic firms operating in the same industry. We find that the presence of foreign firms has a positive relationship with the productivity of domestic firms. This positive relationship is stronger when the technology gap between foreign firms and the domestic firms is small.
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