Export Spillovers of FDI on China's Domestic Firms

This paper examines the horizontal and vertical export spillovers of foreign direct investment (FDI) on China's manufacturing domestic firms by using firm‐level census data over the period of 2000–03. Based on a Heckman two‐step procedure combining first differencing and instrumental variable regression techniques, it is found that FDI has had a positive impact on the export value of domestic firms mainly through backward technology spillovers and a positive impact on the export‐to‐sales ratio of domestic firms through horizontal export‐related information spillovers. After decomposing FDI by different market orientation and domestic firms by different ownership, the paper finds that the positive impact on domestic firms' export values is mainly from the nonexporting and the exporting foreign‐invested enterprises while the positive impact on domestic firms' export‐to‐sales ratios is mainly from the high‐exporting foreign‐invested enterprises. Both types of export spillovers are mainly diffused to domestic non‐state‐owned enterprises.     

外商直接投资行业间技水溢出效应实证分析

文章选取1999~2003年的行业层面板数据，考察了FDI对中国工业部门内资企业生产率的影响。在考虑了多重共线性问题并控制住不可观测的时间效应和行业效应之后，研究结果显示，FDI产生了显著的行业内溢出和前向联系溢出，但后向联系溢出为负。此外，对技术差距最优区间的分析表明，当内资企业生产率为相应外资企业生产率的30％～70％时，前向联系溢出能实现最大化。     

Estimation of foreign MNEs spillovers in Spain

Using Spanish firm-level data, we estimate productivity effects of spillovers from foreign multinationals to domestic firms in both manufacturing and service sectors. We find evidence of a positive productivity effect from multinationals on domestic firms operating in the same industry. Analyzing inter-industry linkages, we find evidence consistent with positive productivity spillovers from forward linkages (i.e. from suppliers to buyers) and negative productivity spillovers from backward linkages (i.e. from buyers to suppliers). Our main results hold when analyzing differences between multinational and domestic firms, and for periods of economic growth and recession, although some differences arise. Interestingly, we find evidence supporting a positive role of spillovers during the last recession period.     

When does FDI have positive spillovers? Evidence from 17 transition market economies

We use rich firm-level data and national input–output tables from 17 countries over the 2002–2005 period to test new and existing hypotheses about the impact of foreign direct investment (FDI) on the efficiency of domestic firms in the host country (i.e., spillovers). We document that backward linkages have a consistently positive effect on productivity of domestic firms while horizontal and forward linkages show no consistent effect. We also examine how the strength of spillovers varies by sector, FDI source, institutional environment (corruption, red tape, level of development), firm’s distance to the technological frontier, and other firm- and country-specific characteristics.     

Intra‐industry Knowledge Spillovers from Foreign Direct Investment in Research and Development: Evidence from China's “Silicon Valley”

This study examines a specific channel of technology diffusion from multinational enterprises to domestic firms in less developed regions: research and development (R&D) activities of multinational enterprises in the host country. Using firm‐level panel data from a Chinese science park, known as China's “Silicon Valley,” we find that the R&D stock of foreign‐owned firms has a positive effect on the productivity of domestic firms in the same industry, while the capital stock of foreign firms has no such effect. These results suggest that foreign firms' knowledge spills over within industries through their R&D activities, but not through their production activities. In addition, we find no evidence of spillovers from domestic firms or firms from Hong Kong, Macao, or Taiwan, suggesting that the size of knowledge spillovers is larger when the technology gap between source and recipient firms is larger.     

Spillovers through backward linkages from multinationals: Measurement matters!

We argue that the measures of backward linkages used in recent papers on spillovers from multinational companies are potentially problematic, as they depend on a number of restrictive assumptions, namely that (i) multinationals use domestically produced inputs in the same proportion as imported inputs, (ii) multinationals have the same input sourcing behaviour as domestic firms, irrespective of their country of origin, and (iii) the demand for locally produced inputs by multinationals is proportional to their share of locally produced output. We discuss why these assumptions are likely to be violated in practice, and provide alternative measures that overcome these drawbacks. Our results, using plant level data for Ireland, clearly show that the choice of backward linkage measure and thus, the assumptions behind it, matters greatly in order to draw possible conclusions regarding the existence of foreign direct investment (FDI)-related spillovers. Using the standard measure employed in the literature we fail to find robust evidence for spillovers through backward linkages. However, when we use alternative measures of backward linkages that relax assumptions (i)–(iii), we find robust evidence for positive FDI backward spillover effects.     

Firms' Technological Trajectories and the Creation of Foreign Subsidiaries

Multinational firms are traditionally considered as firms possessing some technological lead and which are exploiting this proprietary advantage in international markets, but a growing literature has been arguing that multinational firms set up foreign subsidiaries not only as a means to exploit their own technology but also to enrich it. This paper provides some empirical evidence for this. The aim of the paper is to assess the effects of the creation of foreign subsidiaries on firms' technological trajectories.The idea is that by setting up subsidiaries in foreign countries, multinational firms can achieve some form of reverse technology transfer that can be expected to affect their technological trajectories.The empirical investigation uses data from 1992 to 1996 for a sample of 2185 Italian manufacturing firms. Results support the view that the creation of manufacturing subsidiaries has a positive impact on firms' productivity trajectories and this positive impact is greater when subsidiaries are created in regions where knowledge spillovers are expected to be relatively higher, such as the US.     

Technology transfers,foreign investment and productivity spillovers

This paper explores the relationship between foreign direct investment (FDI) and the productivity of host country domestic firms. We rely on a specially designed survey of over 4000 manufacturing firms in Vietnam, and separate out productivity gains along the supply chain (obtained through direct transfers of knowledge/technology between linked firms) from productivity effects through indirect FDI spillovers. In addition to identifying indirect vertical productivity spillovers from FDI, our results show that there are productivity gains associated with direct linkages between foreign-owned and domestic firms along the supply chain not captured by commonly used measures of spillovers. This includes evidence of productivity gains through forward linkages for domestic firms which receive inputs from foreign-owned firms.     

Exporting, linkages and productivity spillovers from foreign direct investment

Abstract.  In this paper we analyse productivity spillovers from foreign direct investment using firm-level panel data for U.K. manufacturing industries from 1992 to 1999. We investigate spillovers through horizontal, backward, and forward linkages; distinguish spillovers from export-oriented vs domestic-market-oriented FDI; and allow for differing effects, depending on domestic firms' export activities. The results suggest that the mechanisms through which spillovers affect domestic firms are very complex and that there are substantial differences in spillover benefits for domestic exporters and non-exporters, and from different types of inward investment.     

吸收能力对FDI技术溢出的调节效应研究——来自广东省制造业企业层面的证据

本文基于2001—2007年广东省制造业企业面板数据,运用Levinsohn—Petrin半参数方法估计企业全要素生产率（TFP）,考察了吸收能力对本土企业TFP的影响以及吸收能力对外商直接投资（FDI）溢出效应的调节效应。检验结果发现：本土企业的吸收能力对生产率提升有显著正向作用;吸收能力通过后向关联渠道对溢出效应起正向调节作用,而在水平方向和前向关联渠道上,调节效应呈现负向影响。研究结果还发现,吸收能力的这种作用对私营企业尤其明显。     

ARE THERE PRODUCTIVITY SPILLOVERS FROM FOREIGN DIRECT INVESTMENT IN CHINA?

We review previous literature on productivity spillovers of foreign direct investment (FDI) in China and conduct our own analysis using a firm‐level data set from a World Bank survey. We find that the evidence of FDI spillovers on the productivity of Chinese domestic firms is mixed, with many positive results largely due to aggregation bias or failure to control for endogeneity of FDI. Attempting over 6000 specifications that take into account forward and backward linkages, we fail to find evidence of systematic positive productivity spillovers from FDI in China.     

Foreign direct investment in services and manufacturing productivity: Evidence for Chile

This paper examines the impact of substantial foreign direct investment (FDI) inflows in producer service sectors on the total factor productivity (TFP) of Chilean manufacturing firms. Positive effects are obtained in firm fixed effects instrumental variables regressions and show that forward linkages from FDI in services explain 7% of the observed increase in Chile's manufacturing users' TFP. Our findings also suggest that service FDI fosters innovation activities in manufacturing. Moreover, we show that service FDI offers opportunities for laggard firms to catch up with industry leaders.     

Offshoring and Firm Performance: Evidence from the Italian Manufacturing Industry

The fundamental question of whether offshoring is value enhancing and, more specifically, whether Italian manufacturing firms that undertake offshoring benefit from higher productivity and profitability is explored. Using data from the tenth wave of the “Survey on Manufacturing Firms” conducted by Unicredit‐Capitalia, it was found that, compared with domestic firms, firms relocating activities to a foreign country have different characteristics, and “better” firms might self‐select into offshoring decision. To disentangle the effect of offshoring on firms' performances from the effect of firm characteristics, several variants of propensity score matching are used. A mild and insignificant positive effect of offshoring on profitability was found and also evidence of a statistically significant positive effect of offshoring on productivity.     

Socialism,Spillovers and Markets in Cuba

This article undertakes an empirical evaluation of Cuba's new development strategy placing tourism at the heart of the process of incorporating markets into a socialist system. The principal research question is whether the introduction of markets related to the Cuban tourism complex has been as successful in establishing viable backward linkages to industry as claimed. Drawing on a multitude of quantitative and qualitative sources, the article demonstrates that backward linkage building has been quite successful and even made possible a transformation of Cuba's formerly so dependent trade structures. However, there are signs that backward linkages are not as viable as could be desired. Other complementary reforms beside the introduction of markets are necessary, such as fighting soft budget constraints in user and producer firms. The article concludes that it will be difficult to fight the roots of the inherited incentive problem without initiating fundamental labour market reforms.     

Productivity Shocks and Monetary Policy in a Two-Country Model

In this paper, we examine the effects of foreign productivity shocks on monetary policy in a symmetric open economy. Our two-country model incorporates the New Keynesian features of price stickiness and monopolistic competition based on the cost channel of Ravenna and Walsh (2006). In particular, in response to asymmetric productivity shocks, firms in one country achieve a more efficient level of production than those in another economy. Because the terms of trade are directly affected by changes in both economies’ output levels, international trade creates a transmission channel for inflation dynamics in which a deflationary spiral in foreign producer prices reduces domestic output. When there is a decline in economic activity, the monetary authority should react to this adverse situation by lowering the key interest rate. The impulse response function from the model shows that a productivity shock can cause a real depreciation of the exchange rate when economies are closely integrated through international trade.     

Trade Liberalization and Firm Productivity: Evidence from Chinese Manufacturing Industries

This paper examines the impact of tariff reduction following China's World Trade Organization (WTO) entry on the productivity of Chinese manufacturing firms using a firm‐level panel database that comprises all of China's manufacturing firms with an annual turnover above 5 million yuan and that spans the period of 2000–2006. An instrumental variable estimator is used to account for the endogeneity of the tariff reduction. The results indicate that China's trade liberalization in the five years following its WTO entry has led to a 0.94% annual increase in total factor productivity for Chinese manufacturing firms. However, the overall productivity gain from the tariff reduction is a net result of a productivity depressing effect of output tariff reduction and a productivity enhancing effect of input tariff reduction. Both effects have diminished in magnitude over the years after China joined the WTO. Firm heterogeneity and turnover plays an important role in generating gains from trade liberalization. The surviving firms have managed to cope with and take advantage of lower tariffs. The extent to which the tariff reduction affects Chinese firms' productivity is also dependent on the ownership structure of the firms with foreign‐invested firms being the clear winner.     

THE NUMBER OF FIRMS AND THE POLITICS OF STRATEGIC TRADE POLICY

Incorporating home firms' lobbying in a country into a third market model of oligopoly, this paper studies how such lobbying affects the government's strategic export policy scheme. We pay special attention to the home firms' lobby formation and its effect on domestic welfare. The home firms can organize a lobby more easily when the number of their rival foreign firms is larger than that of them, and/or when the government is overly concerned with political contribution relative to domestic welfare. The strategic export policy under lobbying cannot improve the domestic welfare, which depends on the number of firms, the government's concern about political donation and the level of socially wasted lobbying costs.     

Does export and productivity growth linkage exist? Evidence from the Indian manufacturing industry

This paper examines the interrelation between exporting and productivity performance by using a representative sample of Indian manufacturing firms over the period 1994–2006. Specifically, we attempt to test the empirical validity of the learning‐by‐exporting and the self‐selection hypotheses for our sample firms. In order to investigate the linkage, in the first step, we test for causality between TFP and export intensity of firms. Although overall results are rather mixed and provide some support for both hypotheses, still the empirical results are more favorable for the self‐selection behavior of firms. In the next stage, we attempt to provide evidence on export and productivity linkage that occurs during various phases of transition in the export market. Our results suggest that entering in the export market does not improve productivity performance. However, the decision to exit from the export market does have an adverse effect on the productivity. In addition, our results indicate the presence of a high sunk cost of exporting coupled with perhaps lesser information about foreign markets. Finally, our results also lend some support to the significant role of in‐house research activities and economies of scale in firms' productivity performance.     

Local Institutions,Foreign Direct Investment and Productivity of Domestic Firms

This paper examines the linkage between foreign direct investment (FDI) and the productivity of domestic firms, paying particular attention to local institutions. Using Chinese manufactures from 1998 to 2007, we find strong evidence that FDI negatively affects the productivity of domestic firms. Firm in regions with better institutions suffers more from foreign presence owing to production contraction, labor cost increases and innovation deterrence.     

Finance constraints and technology spillovers from foreign to domestic firms

Scholars have suggested that externalities such as technology spillovers to domestic firms from the entry and presence of foreign firms – i.e., Foreign Direct Investment (FDI) spillovers – arise only when domestic firms possess adequate absorptive capacity. But they have also maintained a predominantly technological focus in their conceptualization of absorptive capacity, treating it mostly as a function of domestic firms' technological investments. Yet, several anecdotes point to finance constraints being equally important hurdles to absorbing technology. Given the comparatively scant attention to finance constraints in the FDI spillover literature, we present theoretical arguments and a counterfactual simulation for how finance constraints influence firms' realization of FDI spillovers. In the process, we identify two mechanisms underlying why firms facing high finance constraints experience lower FDI spillovers. (125 words).