scholarly journals Foreign direct investment and productivity spillovers: a firm-level analysis of Bangladesh in comparison with Vietnam

2021 ◽  
Vol 10 (1) ◽  
Author(s):  
Md Arif-Ur-Rahman ◽  
Kazuo Inaba
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Spillover Effects ◽  
External Effects ◽  
Productivity Improvement ◽  
Firm Level ◽  
Domestic Firms ◽  
Fdi Spillovers ◽  
Backward Linkages ◽  
Level Analysis

AbstractForeign direct investment (FDI) is expected to generate external effects—usually termed FDI spillovers—for a host country, and these spillovers are thought to have consequences on the productivity of domestic firms. Despite this strong expectation, the empirical findings on FDI spillover are still indecisive. This study examines firm-level panel data to determine the effects of FDI spillover on firms’ productivity in Bangladesh in comparison to Vietnam. We consider both the horizontal and vertical (backward and forward) spillover effects of FDI. We find evidence that Bangladeshi firms gain productivity improvement through intra-industry or horizontal linkages, whereas Vietnamese firms gain through backward linkages. Our findings suggest that increases in foreign presence in the same industry for Bangladesh and in downstream industries for Vietnam are related with increase in output of domestic firms.

Foreign Direct Investment and Productivity Spillovers: A Firm-Level Analysis of Bangladesh in Comparison with Vietnam

2021 ◽  
Author(s):  
Arif-Ur-Rahman ◽  
Kazuo Inaba
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Spillover Effects ◽  
External Effects ◽  
Productivity Improvement ◽  
Firm Level ◽  
Fdi Spillovers ◽  
Foreign Presence ◽  
Backward Linkages ◽  
Level Analysis

Abstract Foreign direct investment (FDI) is expected to generate external effects—usually termed FDI spillovers—for a host country, and these spillovers are thought to have consequences on the productivity of domestic firms. Despite this strong expectation, the empirical findings on FDI spillover are still indecisive. This study examines firm-level panel data to determine the effects of FDI spillover on firms’ productivity in Bangladesh in comparison to Vietnam. We consider both the horizontal and vertical (backward and forward) spillover effects of FDI. We find evidence that Bangladeshi firms gain productivity improvement through intra-industry or horizontal linkages, whereas Vietnamese firms gain through backward linkages. Our findings suggest that increases in foreign presence in the same industry for Bangladesh and in downstream industries for Vietnam are related with increase in output of domestic firms.JEL Code: F2, O1, O3

The Implications of India's Special Characteristics for FDI Spillovers

2016 ◽  
Vol 7 (3) ◽  
pp. 1-25
Author(s):  
Manoj Kumar
Keyword(s):  
Foreign Direct Investment ◽  
Ownership Structure ◽  
Direct Investment ◽  
Firm Level ◽  
Industrial Enterprises ◽  
Promotion Policies ◽  
Fdi Spillovers ◽  
Tax Holidays ◽  
Backward Linkages ◽  
Different Sources

A number of recent studies examine technology transfer from foreign direct investment (FDI) to India's domestic industrial enterprises. This study goes further by investigating the implications of institutions for the nature of technology spillovers during 2004 - 2013. The author examines three institutional features that comprise aspects of India's “special characteristics”: (1) the different sources of FDI, where FDI is nearly evenly divided between mostly Organization for Economic Co-operation and Development (OECD) countries and Mauritius; (2) India's heterogeneous ownership structure, involving state- (SOEs) and non-state owned (non-SOEs) enterprises; and (3) industrial promotion via tariffs or through tax holidays to foreign direct investment. The author found robust positive and significant spillovers (as measured by total factor productivity) to domestic firms via backward linkages (the contacts between foreign buyers and local suppliers). The results suggest varied success with industrial promotion policies. Final goods tariffs as well as input tariffs are negatively associated with firm-level productivity. However, the author found statistically significant evidence of stronger productivity spillovers associated with firms that received tax breaks, suggesting that tax holidays were more successful than tariffs as an instrument to promote productivity growth in India.

The Spillover Effects from Foreign Direct Investment (FDI) on Labor Productivity: Evidence from Indonesian Manufacturing Sector

2019 ◽  
Vol 10 (1) ◽  
pp. 19-30
Author(s):  
Riesta Karentina
Keyword(s):  
Foreign Direct Investment ◽  
Labor Productivity ◽  
Direct Investment ◽  
Spillover Effects ◽  
Long Term Effects ◽  
Short Term ◽  
Domestic Firms ◽  
Fdi Spillovers ◽  
The Impact

Despite growing concern regarding the productivity benefits of foreign direct investment (FDI), few studies have been conducted on the impact of FDI spillovers on domestic firms’ labor productivity in Indonesia. This study aims to do three things. First, it examines the effect of FDI spillovers on domestic firms’ productivity. Second, it investigates the short-term and long-term effects of FDI spillovers on domestic firms’ productivity. Third, it explores the impact of FDI spillovers on domestic firms’ productivity in different groups of industries based on their factor intensity. Micro-level panel data covering about 20,000 medium and large manufacturing establishments in each year over the period 2010 and 2014 was employed. This study suggests that, within the same industry, horizontal spillovers are associated with domestic firms’ productivity: this relationship is negative in the short-term but positive in the long-term. This study’s findings also demonstrate that, across industries, there are negative backward spillover effects on domestic firms’ productivity. In addition, this study points out that FDI spillovers affect domestic firms’ productivity effectively when they are capital-intensive. Therefore, the results imply the importance of maintaining a long-term perspective toward foreign-invested firms in Indonesia and the government needs to stimulate policies that can enhance domestic firms’ capacity to supply intermediate materials and capital to foreign firm in downstream market by truncating the technology gap between foreign and domestic firms.

scholarly journals Does Chinese Inward Foreign Direct Investment Improve the Productivity of Domestic Firms? Horizontal Linkages and Absorptive Capacities: Firm-Level Evidence from Ethiopia

2020 ◽  
Vol 12 (7) ◽  
pp. 3023 ◽  
Author(s):  
Engidaw Sisay Negash ◽  
Wenjie Zhu ◽  
Yangyang Lu ◽  
Zhikai Wang
Keyword(s):  
Sustainable Development ◽  
Foreign Direct Investment ◽  
Absorptive Capacity ◽  
Direct Investment ◽  
Efficient Technology ◽  
Chinese Firms ◽  
Firm Level ◽  
Domestic Firms ◽  
Positive Spillovers ◽  
Local Firms

Publicized as a global call for action in 2015, the United Nations General Assembly (UNGA) has forwarded an agenda of resolutions to achieve the goals of sustainable development by 2030 (SDGs). Due to the specific challenges of funding gaps and the lack of advanced technology, the majority of Sub-Saharan African (SSA) countries are still behind the standard of world development. Since foreign direct investment (FDI) has the potential to bring much-needed capital and efficient technology, FDI has often been considered as a vigorous source of development, even for sustainable development for under-developing economies experienced today. Conspicuously, Chinese outward FDI (OFDI) into SSA has seen a strong upward trend in the 21st Century, after China proclaimed its “go global” strategy. Ethiopia is one of the favored destinations of the trend of Chinese OFDI, which also substantially continues through the SSA region. The hosting economy of Ethiopia expected that Chinese inward FDI comes with capital, efficient technology, and knowledge to contribute innovations through directly improving productivity and competitiveness via technological diffusion to domestic industries and eventually for sustainable development. Against this backdrop, this study utilizes firm-level panel datasets from Ethiopia to address the following couple of research questions. The first question is: are there any productivity differences between the establishment of Chinese-affiliated and domestic firms in the manufacturing industry in Ethiopia? The second is, does the presence of Chinese-affiliated firms provide productivity spillovers for domestic firms in the same industry level for socio-economic development? The investigation was carried out using 2554 manufacturing firm census data, from which 15.04% were Chinese firms operating in Ethiopia. We used the ordinary least squares (OLS) and generalized-method-of-moments (GMM) two-step approaches for estimations. Our findings revealed that, generally, Chinese firms were more productive than local firms and their presence can bring positive potential productivity spillover effects for domestic firms. Specifically, we found that local firms have gained significant positive spillovers when they had a high absorptive capacity, whereas low-absorptive capacity firms suffered negative spillovers. We also found that non-exporting domestic firms experience significant positive spillovers from the presence of Chinese firms.

Foreign Direct Investment in Indian Market

2017 ◽  
pp. 258-293
Author(s):  
Manoj Kumar
Keyword(s):  
Foreign Direct Investment ◽  
Productivity Growth ◽  
Direct Investment ◽  
Firm Level ◽  
Industrial Enterprises ◽  
Nature Of Technology ◽  
Promotion Policies ◽  
Tax Holidays ◽  
Backward Linkages ◽  
Different Sources

A number of recent studies examine technology transfer from foreign direct investment (FDI) to India's domestic industrial enterprises. This study goes further by investigating the implications of institutions for the nature of technology spillovers during 2004 - 2013. We examine three institutional features that comprise aspects of India's “special characteristics”: (1) the different sources of FDI, where FDI is nearly evenly divided between mostly Organization for Economic Co-operation and Development (OECD) countries and Mauritius; (2) India's heterogeneous ownership structure, involving state- (SOEs) and non-state owned (non-SOEs) enterprises; and (3) industrial promotion via tariffs or through tax holidays to foreign direct investment. We find robust positive and significant spillovers (as measured by total factor productivity) to domestic firms via backward linkages (the contacts between foreign buyers and local suppliers). Our results suggest varied success with industrial promotion policies. Final goods tariffs as well as input tariffs are negatively associated with firm-level productivity. However, we find statistically significant evidence of stronger productivity spillovers associated with firms that received tax breaks, suggesting that tax holidays were more successful than tariffs as an instrument to promote productivity growth in India.

scholarly journals Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages

2004 ◽  
Vol 94 (3) ◽  
pp. 605-627 ◽  
Author(s):  
Beata Smarzynska Javorcik
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Foreign Ownership ◽  
Foreign Investments ◽  
Firm Level ◽  
Productivity Spillovers ◽  
Level Data ◽  
Firm Level Data ◽  
Foreign Affiliates ◽  
Backward Linkages

Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In contrast with earlier literature that failed to find positive intraindustry spillovers from FDI, this study focuses on effects operating across industries. The analysis, based on firm-level data from Lithuania, produces evidence consistent with positive productivity spillovers from FDI taking place through contacts between foreign affiliates and their local suppliers in upstream sectors. The data indicate that spillovers are associated with projects with shared domestic and foreign ownership but not with fully owned foreign investments.

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