Vertical and Horizontal Spillovers from Foreign Direct Investment:  Evidence from Malaysian Manufacturing

2017 ◽  
Vol 16 (3) ◽  
pp. 158-183
Author(s):  
Ergun Dogan ◽  
Koi Nyen Wong ◽  
Michael M. C. Yap
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Spillover Effects ◽  
Domestic Firm ◽  
Weak Evidence ◽  
Level Data ◽  
The Cost ◽  
Technology Level ◽  
Human Resource Education ◽  
Local Firms

Given developing countries’ dependence on foreign direct investment (FDI) in manufacturing, it is important to assess the benefits that accompany FDI, given the cost of incentives that are used to attract foreign investments. We empirically analyze FDI spillover effects in Malaysia using unpublished establishment-level data, accounting for domestic firm size, the market orientation of local firms and foreign multinationals, and firm technology level and absorptive capacity. We find weak evidence of horizontal spillovers; backward and forward spillovers are negative in most cases. Because these results raise concerns about the technological capability of local firms, government policies on technology, human resource, education, and R&D should address this.

scholarly journals Foreign Direct Investment and the Survival of Domestic Private Firms in Viet Nam

2014 ◽  
Vol 31 (1) ◽  
pp. 53-91 ◽  
Author(s):  
Ari Kokko ◽  
Tran Toan Thang
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Private Firms ◽  
Viet Nam ◽  
Firm Level ◽  
Level Data ◽  
Vertical Fdi ◽  
Negative Effect ◽  
The Impact ◽  
Local Firms

Foreign direct investment (FDI) may benefit local firms in the host country through various kinds of spillovers, but it may also raise competition and result in the crowding out of domestic firms. Using detailed firm-level data for the period 2001–2008, this paper examines the aggregate effect of FDI on the survival of domestic private firms in Viet Nam. We estimate the impact of both horizontal and vertical FDI and explore how the presence of state-owned enterprises (SOEs) influences the exit hazard for private firms. The results suggest that horizontal and upstream FDI raise the exit hazard significantly, while downstream FDI may reduce the hazard. The presence of SOEs has a direct negative effect on the survival odds of local private firms in the same industry, but there is also an indirect impact on the exit hazard from FDI. Local firms are more vulnerable to foreign entry in sectors with high SOE shares. Looking at the net effects of FDI during the period 2001–2008, we find that results vary between sectors and over time but that the overall impact has been surprising small. The paper also discusses policy conclusions and implications for empirical analyses of spillovers from FDI.

scholarly journals Foreign direct investment, corruption, and institutional reforms

2020 ◽  
pp. 11-11
Author(s):  
Rafael Espinosa-Ramirez
Keyword(s):  
Foreign Direct Investment ◽  
Foreign Investment ◽  
Direct Investment ◽  
Domestic Firm ◽  
Institutional Reforms ◽  
Institutional Level ◽  
Political Contribution ◽  
Host Government ◽  
The Cost ◽  
Lobby Group

Corruption impacts the competitive conditions among firms and the flow of foreign investment. Institutional reforms made for fighting against corruption are sometimes useless. We develop a model in which a corrupted government tries to set an optimal institutional level taking into account the cost of this policy on foreign investment, the benefit of a corrupted domestic firm and the benefit of local citizens. A political contribution is made by a corrupted lobby group in order to benefit from a lower institutional level. Our results suggest that the optimal institutional level depends on the degree of efficiency of firms and the level of corruption of the host government.

scholarly journals Labour Productivity Spillovers from Foreign Direct Investment: Evidence from Malaysian Industry Level Panel Data by Labour Skills Composition

2021 ◽  
Vol 6 (6) ◽  
pp. 247-258
Author(s):  
Norhanishah Mohamad Yunus
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Labour Productivity ◽  
Spillover Effects ◽  
The United States ◽  
Knowledge Spillover ◽  
Seemingly Unrelated Regression ◽  
Skilled Workers ◽  
Skill Composition ◽  
Local Firms

This study adds to the literature by examining both technology and knowledge spillover effects of foreign direct investment (FDI) according to skill composition and also by country spillovers in Malaysian medium-high industry, which raises the question of the real benefits produced by both spillovers that Malaysia can reap from the presence of FDI in enhancing the labour productivity. Using the seemingly unrelated regression (SUR) estimator to estimate labour productivity function by skill composition, the results reported that the presence of Japanese, Singaporean and the United States MNCs are statistically significant in influencing the productivity of high and medium-skilled workers from both technology and knowledge spillover effects during the period of 2000 to 2018. Conversely, the analysis indicated that both Chinese and Taiwanese MNCs significantly increase the low-skilled labour productivity. An interesting finding was discovered, that the negative association between knowledge spillovers and labour productivity across the skills draws the attention for the role of local firms as recipients of FDIs depends not only on their absorptive capacity but also on their strategic decisions regarding search direction and motivational disposition to absorb external knowledge. These issues need to be investigated further to understand how local firms may increase their chances of benefitting from MNC presence.

Does foreign direct investment influence R&D activity in the host country? Evidence from Vietnam

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Van Ha ◽  
Mark J. Holmes ◽  
Gazi Hassan
Keyword(s):  
Foreign Direct Investment ◽  
Foreign Investment ◽  
Direct Investment ◽  
Probit Model ◽  
Innovation Activity ◽  
Heckman Selection Model ◽  
Content Type ◽  
Domestic Firms ◽  
The Impact ◽  
Local Firms

PurposeThis study focuses on the linkages between foreign direct investment and the research and development (R&D) and innovation activity of domestic enterprises in Vietnam.Design/methodology/approachThe Heckman selection model approach is applied to a panel dataset of nearly 7,000 Vietnamese firms for the 2011–2015 study period to investigate the impact of foreign presence on the R&D of local firms through horizontal and vertical linkages. Probit model estimation is employed to examine how foreign investment influences the innovation activity of local companies.FindingsWhile there are a small number of firms carrying out R&D activities in Vietnam, foreign or joint domestic–foreign venture firms are less inclined than domestic firms to undertake R&D. Domestic factors that include capital, labor quality, location and export status of firm have a significant effect on the decision of domestic firms to participate in R&D activity. Only forward linkages and the gross firm output are found to have an impact on the R&D intensity of domestic enterprises, while other factors appear to have no significant influence on how much firms spend on R&D activities.Practical implicationsIn order to promote the R&D activity of domestic firms, policy should focus on (1) the backward linkages between local firms in downstream sectors with their foreign suppliers in upstream sectors, and (2) the internal factors such as labor, capital or location that affect the decisions made by domestic firms.Originality/valueGiven that foreign investment may affect R&D and innovation activity of local firms in host countries, the impact is relatively unexplored for many emerging economies and not so in the case of Vietnam. The availability of a unique survey on Vietnamese firm technology and competitiveness provides the opportunity to address this gap in the literature.

scholarly journals Linkages and spillover effects of South African foreign direct investment in Botswana and Kenya

2019 ◽  
Author(s):  
Felix Adamu Nandonde ◽  
Richard Adu-Gyamfi ◽  
TinayeSonto Mmusi ◽  
Herbert Wamalwa ◽  
Simplice A. Asongu ◽  
...  
Keyword(s):  
Foreign Direct Investment ◽  
South African ◽  
Direct Investment ◽  
Spillover Effects

scholarly journals The Effect of Foreign Direct Investment and Innovation on High Technology Product Imports In Asean 6

2019 ◽  
pp. 1-9
Author(s):  
Roro Aprilia Putri Cahyani ◽  
Tony Irawan ◽  
Prof Widyastutik
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Technological Development ◽  
Panel Data Analysis ◽  
High Technology ◽  
Spillover Effects ◽  
Digital Products ◽  
Domestic Technology ◽  
Technology Products ◽  
Asean Countries

Current technological development changes the people's lifestyle becoming progressively modern. Technological development encourages the rapid digitalization that occurs in all countries. The incapability of a country to meet domestic demand for digital products that are closely related to high technology content drives the import of high technology products. On the other hand, the development of Foreign Direct Investment (FDI) is essential in order to support the development of domestic technology of a country due to its spillover effects. ASEAN 6 is a highly attractive for foreign investors as it has strategic location, large market share and abundant resources. This study examines the influence of FDI and innovation on imported high technology products in ASEAN 6. This research employed the panel data analysis from six ASEAN countries during the period of 2007 to 2016. The results of this study indicated that FDI and innovation have a positive effect on imports of high products technology in ASEAN 6.

scholarly journals Does Plant Size Matter? Differential Effects of Foreign Direct Investment on Wages and Employment in Indian Manufacturing

2018 ◽  
Vol 35 (1) ◽  
pp. 52-80 ◽  
Author(s):  
Shruti Sharma
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Critical Mass ◽  
Regional Analysis ◽  
Spillover Effects ◽  
Indian States ◽  
Differential Effects ◽  
Unskilled Workers ◽  
Size Matter ◽  
Skilled And Unskilled Workers

This paper examines the differential effects, based on the size of the plant, of industry-level foreign direct investment (FDI) on plant-level employment and the wages of skilled and unskilled workers in India's manufacturing sector. On average, there are strong positive differential effects of increased inward-level FDI for large plants relative to small and average-sized plants in terms of employment and the average wages of both skilled and unskilled workers. Small plants experience negative effects from inward FDI, which can be explained by intra-industry reallocation of output from smaller to larger plants. After conducting a regional analysis, I find positive spillovers to small plants in Indian states that receive large and persistent flows of FDI. This suggests that a critical mass of FDI is necessary for small plants to experience positive spillover effects.

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