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ORCID

Deborah Winkler 0000-0003-4891-3522

Keywords

Foreign direct investment; vertical spillovers; linkages; global value chains; foreign firm characteristics; absorptive capacity; transmission channels; agri-business; apparel; mining

Abstract

Using unique survey data on direct supplier-multinational linkages in Chile, Ghana, Kenya, Lesotho, Mozambique, Swaziland, and Vietnam, this paper first evaluates how foreign investors differ from domestic producers in terms of their potential to generate positive spillovers for local suppliers. It finds that foreign firms outperform domestic producers on several indicators, but have fewer linkages with the local economy and offer less supplier assistance, resulting in offsetting effects on the spillover potential. The paper also studies the relationship between foreign investor characteristics and linkages with the local economy as well as assistance extended to local suppliers. It finds that foreign investor characteristics matter for both. Additionally, this paper examines the role of suppliers’ absorptive capacities in determining the intensity of their linkages with multinationals. The results indicate that several supplier characteristics matter, but these effects also depend on the length of the supplier relationship. Finally, the paper assesses whether assistance or requirements from the multinational influence spillovers on suppliers. The results confirm the existence of positive effects of assistance (including technical audits, joint product development, and technology licensing) on foreign direct investment spillovers, while we find no evidence for demand effects.

Acknowledgments

This paper is part of a wider study on the spillover effects of foreign direct investment and their mediating factors. The author would like to thank Beata Javorcik for her guidance and excellent suggestions throughout the project, two anonymous referees, and Thomas Farole for valuable comments and discussions. The views expressed in this paper are those of the author and should not be attributed to the World Bank, its Executive Directors or the countries they represent.

First Page

5

Last Page

44

Page Count

40

Received Date

15 March 2017

Revised Date

31 May 2018

Accept Date

6 June 2018

Online Available Date

8 August 2018

DOI

10.7172/2353-6845.jbfe.2018.2.1

JEL Code

F1; F2

Publisher

University of Warsaw

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