FDI Spillovers and High-Growth Firms in Developing Countries
This paper evaluates the heterogeneous impact of spillovers from multinational corporations (MNCs) to domestic enterprises in the developing world. It empirically investigates two transmission channels of knowledge spillovers. First, direct contrac...
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| Language: | English |
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/330821510693152125/FDI-spillovers-and-high-growth-firms-in-developing-countries http://hdl.handle.net/10986/28903 |
| Summary: | This paper evaluates the heterogeneous
impact of spillovers from multinational corporations (MNCs)
to domestic enterprises in the developing world. It
empirically investigates two transmission channels of
knowledge spillovers. First, direct contractual linkages
between indigenous firms and MNCs. Second, indirect
demonstration effects accrued by domestic firms by imitating
foreign technologies either through observation or by hiring
workers trained by MNCs. The paper focuses on the impact of
spillovers on high-growth firms, which are enterprises with
high job creation rates and, therefore, assumed to have high
absorptive capacities. The paper also evaluates spillovers
stemming from MNCs with different motivations to invest in
developing countries. Employing a survey of around 71,000
firms across 50 sectors in 122 developing countries, the
paper shows that high-growth firms internalize spillovers
through both avenues and that contractual linkages are the
most powerful transmission channel. FDI embedded in global
value chains generates larger spillovers to high-growth
domestic firms than investment that seeks to serve the host
economy. There is no evidence that natural resource-seeking
FDI generates spillovers. The results have important
implications for policy design, as public funding in
developing countries is often directed to support programs
that seek to connect domestic suppliers with MNCs. |
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