WAGE SPILLOVERS IN INDIAN MANUFACTURING

2012 ◽  
Vol 57 (01) ◽  
pp. 1250006 ◽  
Author(s):  
G. CHIDAMBARAN IYER
Keyword(s):  
Foreign Firms ◽  
Skilled Labor ◽  
Firm Level ◽  
Productivity Spillovers ◽  
Domestic Firms

The presence of foreign firms might lead to movement of skilled labor from domestic firms. To prevent such movement, domestic firms could increase their wages. Also, productivity spillovers from foreign firms may increase the productivity of domestic firms and possibly the wages given in domestic firms. In this paper, we try to answer whether the wages offered by domestic firms to their labor is affected by the presence of foreign firms. We carry out our analysis for an unbalanced firm-level panel dataset for 6 two-digit industries in Indian manufacturing. We find some evidence for positive wage spillover in three industries.

scholarly journals Does Perception of Business Climate Differ Between Foreign and Local Investors? A Firm-level Study of Transition Economies in Eastern Europe and Central Asia

2017 ◽  
Vol 4 (2) ◽  
pp. 113
Author(s):  
Olga Golubeva
Keyword(s):  
Eastern Europe ◽  
Central Asia ◽  
Transition Economies ◽  
Foreign Firms ◽  
Business Climate ◽  
Potential Conflict ◽  
Firm Level ◽  
Foreign Investors ◽  
Domestic Firms ◽  
Local Companies

Difference between foreign and local investors in their respective assessments of business climate constraints has not yet been given much attention in research literature. Drawing on institutional theory and the concept of liability of foreignness (LoF), the study contributes towards filling this gap in the context of business climate variables faced by foreign firms operating in transition economies. The Mann-Whitney U Test is applied to firm-level data of 30 transition economies in Eastern Europe and Central Asia. We found that foreign investors experience less trouble with access to finance, tax rate and competition towards the informal sector compared with domestic firms. Conversely, such variables as courts, custom and trade regulations, inadequate workforce, and labor regulations disturbed foreign investors more than local companies. LoF appears as a balanced outcome of firm-specific advantages, possessed by foreign investors, and location and institutional advantages, utilized by the local companies. The results point towards important possible synergies in enhancing the business climate in transition economies by policy-makers, and to potential conflict between policy reforms accommodating the interests of foreign capital against those of domestic firms.

Does FDI crowd out domestic firms? Micro-level evidence from the Republic of Korea

2018 ◽  
Vol 22 (4) ◽  
pp. 405-416
Author(s):  
Hyelin Choi
Keyword(s):  
Foreign Investment ◽  
Small Firms ◽  
Advanced Technology ◽  
Foreign Firms ◽  
Crowding Out ◽  
Firm Level ◽  
Content Type ◽  
Domestic Firms ◽  
Crowd Out ◽  
The Impact

PurposeThe purpose of this paper is to investigate the impact of the foreign investment on the exit and sales of the domestic firms. Furthermore, it studies whether domestic firms undergo different influences by foreign firms according to the size of domestic firms.Design/methodology/approachKorean firm-level data for the period of 2006 through 2013 provided by Statistics Korea are used to study the impact of the foreign investment on the exit and sales of the domestic firms.FindingsThe result shows that foreign firms crowd out small firms from the market and take their shares in the domestic market. On the other hand, larger firms rather enjoy positive spillover effect from foreign firms, reducing its exit probability and increasing sales. It may be that large firms have enough competitiveness and ability to learn and apply the advanced technology of the foreign firms.Practical implicationsDespite the strong belief on the positive impacts of the foreign firms such as knowledge spillovers or job creation, there might be crowding-out or market-stealing effect from the presence of foreign firms. If the latter effect is larger than positive effect, the incentives provided by host country government to the multinational firms cannot be justified. In this regard, the question addressed in this paper is very important.Originality/valueWhile most of previous papers have focused on the impacts of the foreign firms on productivity of the domestic firms, this paper deals with their impacts on the exit and sales of the domestic firms in order to examine more direct crowding-out and market-stealing effect of foreign firms.

FDI and incumbent R&D behavior: evidence from Indian manufacturing sector

2017 ◽  
Vol 44 (3) ◽  
pp. 380-399 ◽  
Author(s):  
Qayoom Khachoo ◽  
Ruchi Sharma
Keyword(s):  
Manufacturing Sector ◽  
Empirical Studies ◽  
Foreign Firms ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Domestic Firms ◽  
Indian Manufacturing Sector ◽  
The Impact ◽  
Two Step Estimation

Purpose The study is an attempt to analyze the impact of foreign direct investment (FDI) on research and development (R&D) behavior of incumbent firms’, both domestic and foreign, operating in Indian manufacturing sector. FDI inflows into the host country escalates the level of competition compelling domestic as well as existing foreign firms to adjust their spending on R&D. The purpose of this paper is to propose that response of domestic and existing foreign firms to the FDI entry vary, with domestic firms increasing their spending on R&D whereas foreign firms reducing it. Design/methodology/approach Using a rich firm level data set from Indian manufacturing for the period 2000-2012, the study utilizes Heckman’s two- step estimation strategy to estimate the impact of FDI entry on R&D behavior of incumbents. Findings FDI entry significantly increases the tendency of domestic and foreign firms to invest in R&D; however, the impact on R&D intensity for both domestic and foreign firms appears to be minimal. Originality/value The study contributes to the existing literature on two fronts. One, unlike other studies, it examines the impact of FDI entry not only on R&D behavior of domestic firms but also on the R&D behavior of existing foreign firms. Second, it addresses the problem of selection bias that has been largely ignored by majority of empirical studies on R&D.

Does the Presence of Foreign Firms Reduce Domestic Firms’ Financial Constraints in Sub-Saharan Africa?†

2019 ◽  
Vol 28 (4) ◽  
pp. 343-370
Author(s):  
Habtamu Tesfaye Edjigu ◽  
Nicholas Sim
Keyword(s):  
Financial Constraints ◽  
Foreign Firm ◽  
Bank Loans ◽  
Sub Saharan Africa ◽  
Foreign Firms ◽  
African Countries ◽  
Firm Level ◽  
Domestic Firms ◽  
Level Data ◽  
Sub Saharan

Abstract Firms in the SSAs (sub-Saharan African countries for short) face severe financial constraints. Because financial markets in the SSAs are underdeveloped, policymakers have sought after the establishment of foreign-owned firms in their countries to help, among others, alleviate the financial constraints faced by domestic firms. However, there is no empirical evidence that speaks to the association between foreign firm presence and domestic firms’ financial constraint. Using firm-level data spanning across 36 SSAs from the World Bank Enterprise Survey, we show that the increase in foreign firm presence can ease the financial constraints of domestic firms in the SSAs. One reason is that foreign-owned firms are not only less financially constrained, they are also less likely to apply for bank loans. Therefore, an increase in foreign firm presence may reduce the competition for loans and ease the financial constraints of domestic firms by improving their borrowing success.

scholarly journals Ownership categories and investment patterns after mass privatization in Bulgaria and the Czech Republic

2007 ◽  
Vol 4 (3) ◽  
pp. 53-63
Author(s):  
Evgeni Peev
Keyword(s):  
Czech Republic ◽  
Cash Flow ◽  
Profit Maximization ◽  
Foreign Firms ◽  
Firm Level ◽  
The Czech Republic ◽  
Domestic Firms ◽  
Mass Privatization ◽  
Q Model ◽  
Investment Patterns

This paper studies the emerging ownership and investment patterns of listed companies during the first years after mass privatization (Bulgaria) and after around ten years after mass privatization (the Czech Republic). It explores firm-level data over the period 1998-2003. We apply accelerator-cash flow model and q-model to cash-flow investment sensitivity. In the Bulgarian sample, contrary to the expectations firms controlled by foreign firms are financially constrained. Firms controlled by stateowned holding company show financial re-allocation investment pattern, while firms under control of privatisation fund have inertial investment behaviour. In the Czech Republic, the estimates of the q-model show that companies controlled by foreign investors are less financially constrained and have profit-maximization behavior, firms controlled by the National Property Fund have insignificant financial re-allocation, and firms under control of other domestic firms are most financially constrained. However, the accelerator model does not confirm these results for the firms under control of other domestic firms

scholarly journals IPR Law Protection and Enforcement and the Effect on Horizontal Productivity Spillovers from Inward FDI to Domestic Firms: A Meta-analysis

2021 ◽  
Author(s):  
Danai Christopoulou ◽  
Nikolaos Papageorgiadis ◽  
Chengang Wang ◽  
Georgios Magkonis
Keyword(s):  
Intellectual Property ◽  
Property Rights ◽  
Intellectual Property Rights ◽  
Meta Analysis ◽  
Host Countries ◽  
Productivity Spillovers ◽  
Domestic Firms ◽  
The Relationship ◽  
Positive Effect

AbstractWe study the role of the strength of Intellectual Property Rights (IPR) law protection and enforcement in influencing horizontal productivity spillovers from inward FDI to domestic firms in host countries. While most WTO countries adopted strong IPR legislation due to exogenous pressure resulting from the signing of the Trade-Related Aspects of IPR (TRIPS) agreement, public IPR enforcement strength continues to vary significantly between countries. We meta-analyse 49 studies and find that public IPR enforcement strength has a direct positive effect on horizontal productivity spillovers from inward FDI to domestic firms and a negative moderating effect on the relationship between IPR law protection strength and horizontal productivity spillovers from inward FDI to domestic firms.

Does foreign direct investment spillover total factor productivity growth? A study of Indian drugs and pharmaceutical industry

2017 ◽  
Vol 24 (7) ◽  
pp. 1937-1955 ◽  
Author(s):  
Nitin Arora ◽  
Preeti Lohani
Keyword(s):  
Foreign Direct Investment ◽  
Pharmaceutical Industry ◽  
Total Factor Productivity ◽  
Direct Investment ◽  
Spillover Effect ◽  
Foreign Firms ◽  
Factor Productivity ◽  
Content Type ◽  
Domestic Firms ◽  
Tfp Growth

Purpose Foreign firms have certain advantages which may spillover to domestic firms in the form of improvements in total factor productivity (TFP) growth. The purpose of this paper is to empirically observe the presence of TFP spillovers of foreign direct investment (FDI) to domestic firms through analyzing source of TFP growth in Indian drugs and pharmaceutical industry. Design/methodology/approach This paper examines the sources of TFP spillovers of FDI in Indian drugs and pharmaceutical industry over the period 1999 to 2014. The data of 304 firms has been used for estimation of the growth rates of TFP and its sources under stochastic frontier analyses based Malmquist productivity index framework. For frontier estimation, the Wang and Ho (2010) model has been executed using translog form of production function. Findings The results show that there exists significant TFP spillover effect from the presence of foreign equity in drugs and pharmaceutical industry of India. The results also show that the major source of TFP fluctuations in the said industry is managerial efficiency that has been significantly affected by FDI spillover variables. In sum, the phenomenon of significant Intra-industry (horizontal) efficiency led productivity spillovers of FDI found valid in case of Indian drugs and pharmaceutical industry. Research limitations/implications The number of foreign firms is very less to imitate the significant impact of foreign investment on TFP growth of Indian pharmaceutical industry at aggregated level; and the Wang and Ho (2010) model is failing to capture direct impact of FDI on technological change under Malmquist framework. Practical implications Since, there exists dominance of domestic firms in Indian drugs and pharmaceutical industry, the planners should follow the policy which not only attract FDI but also benefit domestic firms; for example, developing modern infrastructure and institution which will further help domestic firms to absorb spillovers provided by the Multinational Corporations and also accelerate the growth and development of the economy. Social implications In no case, the foreign firms should dominate the market share otherwise the efficiency spillover effect will be negative and the domestic firms will be destroyed under the self-centric approach of foreign firms protected by the recent patent laws. Originality/value The study is a unique attempt to discuss the production structure and sources of TFP spillovers of FDI in Indian drugs and pharmaceutical industry with such a wide coverage of 304 firms over a period of 16 years under Wang and Ho (2010) model’s framework. The existing studies on TFP spillovers are using either a small sample size of firms or based upon traditional techniques of measuring spillover effects.

scholarly journals Revenue Impacts of MPP Branded Funds: A Firm-Level Analysis

2003 ◽  
Vol 32 (2) ◽  
pp. 184-197 ◽  
Author(s):  
Paul M. Jakus ◽  
Kimberly L. Jensen ◽  
George C. Davis
Keyword(s):  
Firm Size ◽  
Market Access ◽  
Major Change ◽  
Export Promotion ◽  
Firm Level ◽  
Promotion Program ◽  
Domestic Firms ◽  
Market Promotion ◽  
Access Program ◽  
Level Analysis

The USDA's Market Access Program (formerly Market Promotion Program) recently underwent a major change to redirect all branded products export promotion funds to small domestic firms and cooperatives. The redirection responded to criticisms by the General Accounting Office of past allocations of branded products export promotion funds to large, experienced exporters. This study uses a firm-level analysis to examine whether firm size and export experience matter in how effectively firms use the promotion funds to increase their revenues. The results support neither the GAO criticisms nor the recent program redirection.

Access to skilled labor, institutions and firm performance in developing countries

2019 ◽  
Vol 40 (2) ◽  
pp. 328-355 ◽  
Author(s):  
Charilaos Mertzanis ◽  
Mona Said
Keyword(s):  
Developing Countries ◽  
Firm Performance ◽  
Technological Progress ◽  
Skilled Labor ◽  
Firm Level ◽  
Content Type ◽  
Country Level ◽  
Wide Range ◽  
Development Institutions

Purpose The purpose of this paper is to examine the role of access to skilled labor in explaining firms’ sales growth subject to the controlling influence of a wide range of firm-specific characteristics and country-level economic and non-economic factors. Design/methodology/approach The analysis uses a consistent and large firm-level data set from the World Bank’s Enterprise Surveys that includes 138 developing countries. An instrumental variables model with a GMM estimator is used for estimating the impact of access to skilled labor on firm performance. In order to obtain more robust estimators, the analysis introduces country-level controls reflecting the influence of economic and institutional factors, such as economic and financial development, institutional governance, education and technological progress. Findings The results document a significant and positive association between access to skilled labor and firm performance in the developing world. The explanatory power of access to skilled labor remains broadly robust after controlling for a wide range of firm-specific characteristics: sectoral and geographical influences matter. The results also show that the association between labor skill constraints and firm performance is mitigated by country-level factors but in diverse ways. Development, institutions, education and technological progress exert various mitigating effects on firm-level behavior regarding access to skilled labor. Originality/value The paper’s novel contribution is threefold: first, it uses joint firm, sector and country-level information to analyze the role of access to skilled labor on firm performance; second, it uses consistently produced information at the firm level from 138 developing countries; and, third, it considers the controlling impact of a wide range of country-level factors that reflect a country’s overall development, institutions and evolution.

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