A meta‐analysis of the indirect impact of foreign direct investment in old and new EU member states: Understanding productivity spillovers

In this paper, we summarise, combine and explain recent findings from firm‐level empirical literature focusing on the indirect impact of foreign direct investment (FDI ) on economic performance, measured as productivity, in the Enlarged Europe. We have reviewed 52 quantitative studies, released between 2000 and 2015 and codified 1,133 estimates. We run a regression of regressions which measures the strength of the FDI –productivity relationship. Taking advantage of large number of high‐quality studies on FDI and its role in explaining the growth in firms’ productivity in Europe, we adopt recent meta‐regression analysis methods—funnel asymmetry and precision estimate tests and precision‐effect estimate with standard errors —to explain the heterogeneous impact of FDI . This paper assesses the country‐specific impact of FDI on firms’ performance, after taking publication selection bias, econometric modelling and the individual studies’ characteristics fully into account. Our results show that on average FDI has a positive indirect impact on productivity. The impact is especially significant in selected European countries, and we interpret this as a sign of better absorptive capacities in those countries.     

Domestic regulation,import penetration and firm-level productivity growth

This paper shows that the impact of import penetration on firms’ productivity growth depends on firms’ distance to the efficiency frontier and on product market regulation. Using firm-level data for a substantial number of OECD countries from the late 1990s to late 2000s, the analysis reveals nonlinear effects of both sectoral import penetration and de jure product market regulation measures, depending on firms’ positions along the global distribution of productivity. Close to the technology frontier, import penetration has a strongly positive effect on firm-level productivity growth, with less stringent domestic regulation enhancing this effect substantially. However, far from the frontier, the effect of import penetration on firm-level productivity growth is much smaller and often not significant. Its interaction with domestic regulation generally has no statistically significant effect either. The heterogeneous effects of import penetration and domestic product market regulation on firm-level productivity growth are consistent with a neo-Schumpeterian view of trade and regulation.     

Corporate Taxation of Heterogeneous Firms and the Welfare Effects of Labour Unions

This paper examines the welfare effects of powerful labour unions when the government levies a uniform tax rate – as is currently the case in most OECD countries – and firms are heterogeneous with respect to productivity. I show that an increase in the bargaining power of labour unions can decrease the welfare loss generated by restriction of the tax policy and provide conditions under which powerful labour unions decrease the likelihood that firms will move abroad. I also reproduce the well‐known effect whereby powerful labour unions decrease corporate tax rates if firms are mobile.     

Productivity efficiency and firm size: An empirical analysis of foreign owned companies

There are various arguments about the impact of firm size on productivity growth. On one hand, it is claimed that large firms could be more efficient in production because they could use more specialized inputs, better coordinate their resources, etc. On the other hand, it is emphasized that small firms could be more efficient because they have flexible, non-hierarchical structures, and do not usually suffer from the so-called agency problem. This paper argues that size exerts an indirect effect on firms’ productivity, as it conditions the impact of internal factors on productivity. By using different methodological approaches to assess the impact of different characteristics of foreign owned firms on productivity, this paper analyzes to what extend the heterogeneous pattern of productivity can be accounted for by the levels of those factors.     

The impact of trade liberalization on productivity: Evidence from India's formal and informal manufacturing sectors

Despite a large literature investigating the impacts of trade on firm productivity, there is almost no evidence on how small firms react to trade liberalization. Using a unique dataset of firm-level surveys that are representative of the entire Indian manufacturing industry, I show that India's unilateral reduction in final goods tariffs increased the average productivity of small, informal firms, which account for 80% of Indian manufacturing employment but have been excluded from previous studies. In contrast, the increase in productivity among larger, formal firms was driven primarily by the concurrent reduction in input tariffs. By examining the effect of the tariff liberalization on the distributions of productivity and firm size, I find evidence consistent with the exit of the smallest, least productive firms from the informal sector. In addition, I find that although the decline in final goods tariffs did not significantly impact average formal sector productivity, it did increase productivity among the top quantiles of the distribution.     

Global sourcing,productivity and export intensity

This paper investigates the effect of global sourcing on firm performances by using data on Danish manufacturing firms during the period 1995–2006. The results show that firms with better ex-ante characteristics are more inclined to source intermediate inputs from abroad. The results also show that firms that source from different locations possess different ex-ante characteristics; the most productive source inputs from high-wage countries while capital stock and being an exporter are more important factors when sourcing from low-wage countries. Moreover, controlling for the endogeneity of both the sourcing decision and location by using instrument variable and DiD matching approach, the results seem also to suggest that firms that source inputs from high-wage countries benefited from doing so in terms of higher growth of productivity and export intensity. Firms that source inputs from low-wage countries, on the other hand, seem not to have experienced any significant impact on neither productivity nor export, not even three years after they started to source inputs from these countries.     

Export variety and country productivity: Estimating the monopolistic competition model with endogenous productivity

This paper provides evidence on the monopolistic competition model with heterogeneous firms and endogenous productivity. We show that this model has a well-defined GDP function where relative export variety enters positively, and estimate this function over 48 countries from 1980 to 2000. Average export variety to the United States increases by 3.3% per year, so it nearly doubles over these two decades. The total increase in export variety is associated with a 3.3% average productivity improvement for exporters over the two decades. Overall, the model can explain 31% of the within-country variation in productivity (or 52% for the OECD countries), but only a very small fraction of the between-country variation in productivity.     

Learning from exporting: The moderating effect of technological capabilities

There is evidence that exporters are more productive than non-exporters. Scholars argue that exporters may have access to knowledge spillovers in foreign markets and use this knowledge to become more efficient. However, we know little about whether learning from exporting is affected by firms’ heterogeneous resource endowments and, particularly, about the specific firm characteristics that matter the most in this respect. Utilizing a sample of 1534 Spanish manufacturing firms from 1990 to 2002, we empirically analyze whether a firm's technological capabilities (proxied by its relative R&D expenditures) affect its ability to learn from the interaction with foreign agents. We find that firm productivity increases after exporting for all firms. However, ex post productivity improvements are larger for the more technologically advanced firms than they are for their less technologically advanced counterparts. Our results show that some firms stand to benefit more from exporting than others and hint at the importance of absorptive capacity for knowledge acquisition overseas.     

中美贸易摩擦对异质性企业的影响——基于中国A股上市公司的事件研究

随着中国对外贸易的蓬勃发展,双边贸易摩擦事件也日益增多,这种外部贸易摩擦究竟会对中国微观主体产生怎样的影响?基于中美贸易摩擦的背景,以中国A股上市公司为研究样本,采用事件研究法实证检验外部贸易摩擦的微观主体效应。研究结果表明,中美贸易摩擦对生产率、规模、要素密集度、所有权属性不同的企业的影响均存在显著差异,具体而言,中美贸易摩擦对高生产率企业、大规模企业、低劳动密集度企业与民营企业的影响相对更大。进一步研究发现,采用不同企业异质性衡量指标的检验结果最终均可归结于企业全要素生产率,即全要素生产率是企业在中美贸易摩擦中所受影响程度大小的决定因素,而且生产率越高的企业所受影响程度越大。该研究结果有助于理解中美贸易摩擦的微观主体效应,从而为中国更好地解决外部贸易摩擦与促进国内经济转型提供借鉴和参考。     

Learning to export: Export growth and the destination decision of firms

I find evidence that the geographic expansion of firm exports occurs slowly over time and that a large share of export growth is due to incumbent exporters entering new destinations. New exporters enter large countries and destinations with characteristics similar to their domestic market. Less similar, distant or less developed countries are entered by firms already exporting to other destinations. I formulate a dynamic general equilibrium model to test if these patterns are due to firms learning how to export (as other recent empirical findings have suggested) or other factors considered in the literature. In this model, heterogeneous firms experience learning in the form of market entry costs that depend on export history. Using Russian firm level data, I find that learning plays a significant role in explaining the observed entry patterns, which standard trade models cannot account for.     

The impact of trade liberalization on productivity: Evidence from India's formal and informal manufacturing sectors

Despite a large literature investigating the impacts of trade on firm productivity, there is almost no evidence on how small firms react to trade liberalization. Using a unique dataset of firm-level surveys that are representative of the entire Indian manufacturing industry, I show that India's unilateral reduction in final goods tariffs increased the average productivity of small, informal firms, which account for 80% of Indian manufacturing employment but have been excluded from previous studies. In contrast, the increase in productivity among larger, formal firms was driven primarily by the concurrent reduction in input tariffs. By examining the effect of the tariff liberalization on the distributions of productivity and firm size, I find evidence consistent with the exit of the smallest, least productive firms from the informal sector. In addition, I find that although the decline in final goods tariffs did not significantly impact average formal sector productivity, it did increase productivity among the top quantiles of the distribution.     

The trade comovement puzzle and the margins of international trade

Countries that trade more with each other tend to have more strongly correlated business cycles. Yet, traditional international business cycle models predict a much weaker link between trade and business cycle comovement. We propose that fluctuations in the number of varieties embedded in trade flows may drive the observed comovement by increasing the correlation among trading partners' aggregate productivity. Our hypothesis is that business cycles should be more strongly correlated between countries that trade a wider variety of goods. We find empirical support for this hypothesis. After decomposing trade into its extensive and intensive margins, we find that the extensive margin explains most of the trade–productivity and trade–output comovement. This result is striking because the extensive margin accounts for only a fourth of the variability in total trade. We then develop a two-country model with heterogeneous firms, endogenous entry, and fixed export costs, in which the aggregate productivity correlation increases with trade in varieties. A numerical exercise shows that our proposed mechanism increases business cycle synchronization compared with the levels predicted by traditional models.     

FDI modes and parent firms' productivity in emerging economies:Evidence from Taiwan

This article investigates the effect of foreign direct investment (FDI) on the productivity of parent firms for multinational enterprises in Taiwan. The current research specifically examines the potential differences in productivity effect between FDI toward developing (vertical FDI) and developed countries (horizontal FDI) and between electronics and non-electronics firms. Using panel data on Taiwan firms from 2000 to 2005, results obtained using propensity score matching (PSM) show thatmultinational firms experience a higher productivity following their FDI in developing countries. A time lag exists in productivity gain of investment to developed countries, and is relevant only to electronics firms. Employing the generalized method of moment of the panel fixed model to control for problems of endogeneity and unobservable heterogeneity, the empirical finding suggests that productivity effect caused by investing in developing countries remains significantly positive. A lagged productivity-enhancing effect is also found after FDI in developed countries for both electronics and non electronics firms.     

Foreign direct investment,black economic empowerment and labour productivity in South Africa

The impact of foreign direct investment (FDI) on domestically owned firms in developing countries has been widely debated in the literature. It has been argued that FDI provides access to advanced technologies and other intangible assets, which may spill over to the host country and allow domestic firms to improve their performance. While there is a substantial literature on this issue, for obvious reasons, little is known about the effect of FDI on domestic firms in the African context. Noting this gap, this paper uses two-period (2003 and 2007) firm level panel data from South Africa to examine the impact of FDI on the labour productivity of domestic firms. A key policy change during this time period was the passage of the broad-based black economic empowerment act (BB-BEE) and we also examine the effect of the interaction between foreign firm ownership and BEE on labour productivity. Regardless of the empirical specification, we find no spillover effects and no evidence that a greater degree of BEE compliance by foreign firms influences labour productivity.     

Technology spillovers: Kenya and Malaysia compared

This paper aimed at investigating the existence of productivity spillovers and their transmission channels in both Kenya and Malaysia firm-level panel data from the manufacturing sector for the period 2000–2005. Both countries have a long history of relying on FDI in industrial development. The existing literature on productivity spillovers suggests that productivity spillovers may be one of the most important effects that foreign MNEs impart to local firms in developing countries. Yet still, few studies exist in both countries on productivity spillovers and their transmission channels. Three spillover channels were examined: demonstration, competition, and information. In addition, the backward linkage channel was examined for the case of Malaysia. The results reveal that there is limited evidence of negative productivity spillovers from foreign firms to domestic firms through the competition effects in Kenya. In Malaysia, there is evidence of positive spillovers from foreign-owned firms to domestic firms through the demonstration effects. In addition, there is evidence of negative spillovers through the competition effects as well as backward linkages. There is also evidence of positive productivity spillovers from domestic firms to foreign-owned firms through backward linkages. Productivity spillovers are found to be dependent on the technology gap.     

Characterising Euro Area Multinationals

This study uses firm‐level data on a large sample of European manufacturing firms to investigate the links between opening up foreign affiliates and firms’ productivity. The analysis is guided by recent theoretical models of international trade with firm heterogeneity. The paper finds that while only a small share of euro area firms locate affiliates abroad, these firms account for over‐proportionally large shares of output, employment and profits in their home countries. They have higher survival rates and their productivity growth is also higher. The strongest contribution is by productivity growth of existing firms with a multinational status rather than entry into the multinational status. Finally, there are performance premia for multinationals with a large number of affiliates abroad relative to those with a small number.     

Multinational Enterprises and Foreign Direct Investment: Introduction

This study uses firm‐level data on a large sample of European manufacturing firms to investigate the links between opening up foreign affiliates and firms’ productivity. The analysis is guided by recent theoretical models of international trade with firm heterogeneity. The paper finds that while only a small share of euro area firms locate affiliates abroad, these firms account for over‐proportionally large shares of output, employment and profits in their home countries. They have higher survival rates and their productivity growth is also higher. The strongest contribution is by productivity growth of existing firms with a multinational status rather than entry into the multinational status. finally, there are performance premia for multinationals with a large number of affiliates abroad relative to those with a small number.     

Exploiting ICT potential in service firms in transition economies

Service industries are the most intensive users of information-communication technology (ICT) and some developed countries have already displayed noticeable productivity gains due to ICT use in services. The pattern of intensive use of ICT in services tends to be replicated in transition economies, however the evidence of ICT impacts on growth and productivity is lacking at the aggregate and industry level owing to deficient data and methodological problems. To overcome some of the problems in estimating the effects of ICT use we pursue firm-level analysis and apply production function approach to estimate the impact of ICT on the performance of service firms in Slovenia. The results suggest that service firms are more intensive ICT users than manufacturing firms and that ICT use significantly influences the productivity of service firms. The positive impact of ICT use on productivity applies to all service firms irrespective of their size. The links are stronger for service firms with above average ICT use. Due to the absence of data on complementary expenditures for training and organisational change related to ICT adoption the results might overemphasise the effects of ICT investment.     

Cross sectoral FDI spillovers and their impact on manufacturing productivity

This paper explores the relationship between FDI spillovers and productivity in manufacturing firms in five European transition countries. The novelty of our approach lies in exploring different mechanisms of horizontal spillovers and disentangling the impact of backward and forward vertical spillovers from services and manufacturing sectors. We rely on firm level data obtained from the Amadeus database and annual input-output tables. The results from dynamic panel model estimations reveal that local manufacturing firms benefit from the presence of foreign firms in upstream services, especially in the knowledge intensive services, and in downstream manufacturing sector. Demonstration effect is found to be negatively associated with domestic firms’ productivity, while worker mobility and increased competition appear to be the main channels of horizontal knowledge diffusion. The firms’ productivity is also influenced positively by human capital and intangible assets. Finally, we show that the direction and intensity of both vertical and horizontal spillovers depend on the absorptive capacity of domestic firms.     

International standards certification,institutional voids and exports from developing country firms

This paper analyses the impact of International Standards Certification (ISC) on the export participation and the scale of exports of firms based in 89 developing or transition countries. We conceptualise ISC as an endogenous institutional advantage, which bridges institutional voids in the country and helps firms to export. The empirical results show that certified firms are more likely to export, and to export on a larger scale. The impact of ISC runs through two channels: productivity and transaction cost economies. We show that certification plays an important role in bringing down transaction costs in international markets, while also maintaining and raising efficiency. This finding is reinforced by additional evidence, suggesting that ISC matters more for the export participation of domestic firms than for foreign firms and is of greater importance for firms based in countries characterised by severe institutional voids.