With regards to regional and countrywide effects on FDI spillovers, spillovers have been
argued to occur more frequently at the local level than at the country level, as it is easier for
domestic firms to imitate advanced technologies from their nearby competitors than from those
located far away. There may be three reasons for this. First, FDI firms may require the
purchasing of higher-quality intermediate products from local suppliers and encourage
competitive markets in the downstream sector, thus forcing local firms to upgrade technologies,
adopt organizational techniques, and hire well-trained employees to meet the higher standards or
face tougher competition. Second, FDI firms often have to train and retrain local workers to
operate and use new machinery and advanced technologies. This leads to the widening of the
availability of local skills to regional markets and the increasing of new local entrepreneurial
formations. Finally, FDI enterprises have direct contacts with local suppliers and distributors,
enabling them to lower transportation cost and facilitate communication among business
counterparts.