Building on this insight, a third generation of studies
that has looked for positive externalities of FDI for domestic
firms in upstream industries (suppliers) reports
more encouraging findings. In addition, these papers
have addressed a number of methodological problems
in the previous literature.7 The results of Javorcik’s
(2004) widely cited paper, which uses panel data for
Lithuania from 1996 through 2000 to examine whether
the productivity of domestic firms is correlated with
the presence of multinationals in downstream sectors
(potential customers), are consistent with productivity
externalities of FDI occurring through contacts between
foreign affiliates and their local suppliers in upstream sectors, but there is no evidence of positive externalities
within the same industry.