This paper presents the spillover effect resulting from the foreign direct investment with a focus on the manufacturing firms in Ethiopia. Being one of the pillars of the Growth and Transformation Plan (GTP), identifying the productivity spillovers arising from the FDI to the sector is timely. The research covers extensive econometric analysis based on the Central Statistics Agency´s (CSA) survey, for the years 2004 up to 2010, on the manufacturing firms and an Input-Output matrix, for the year 2005/6, constructed by the Ethiopian Development Research Institute (EDRI). My analysis suggests that there is an econometric evidence for positive Backward spillovers and negative Forward spillovers to the total productivity of the manufacturing firms in the country. The paper´s findings on this aspect are limited. Because, the analysis entirely rely on industry level secondary data and only one year Input-Output matrix. Therefore, there is a potential for further research work; given this benchmark finding.
foreign direct investment spillover effect total factor productivity