Spillovers from Foreign Direct Investment: Within or between Industries?

By Maurice Kugler. 2006

511 citations recorded by the source corpus.

This paper contributes an estimation framework to measure both technological and linkage externalities from foreign direct investment (FDI). Empirical research dealt mainly with intra-industry spillovers from FDI with restrictive treatment of inter-industry effects until recently. However, as optimal organization of the multinational corporation (MNC) involves minimization of profit losses due to leakage of technical information to competitors, host country firms within the MNC´s sector experience limited productivity gains ensuing FDI. Host-country producers in other sectors may benefit. For example, MNCs transfer knowledge to local downstream clients, or outsource to local upstream suppliers. Hence, FDI substitutes within-sector domestic investment but complements it across sectors. The net impact on aggregate capital formation by host-country producers hinges on the interaction between linkages and spillovers. Estimations based on the Colombian Manufacturing Census yield the sectoral pattern of FDI spillovers displaying knowledge propagation between but not within industries. The findings reveal outsourcing relationships of MNCs with local upstream suppliers as a channel of diffusion.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/0c056faeed9bd95334396ffaa7520ca67c5441bd

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Citations in the corpus

Global cluster networks—foreign direct investment flows from Canada to China (2014, background): “On the other hand, FDIs may avoid clusters, if geographical proximity to competitors could lead to knowledge leakage and imitation in a less-established legal context (Kugler, 2006).”
MNEs vertical linkages: The experience of Vietnam after Malaysia (2007, background): “Similarly, in the context of further impact of the multinationals, it is common to differentiate between horizontal and vertical spillovers (Girma, Görg, & Pisu, 2004) or intra- and inter-industry spillovers (Kugler, 2006).”
Economic Growth, Local Industrial Development and Inter-Regional Spillovers from Foreign Direct Investment: Evidence from China (2012, background): “6 Javorcik [8], Kugler [31], and Liu [32] use firmlevel data from Lithuania, Columbia, and China, respectively, and find a positive impact of FDI on domestic firms’ productivity.”
Technology transfers, foreign investment and productivity spillovers (2015, background): “Kugler (2006) finds similar evidence for FDI spillovers that can be attributed to the outsourcing of inputs by foreign firms to domestic suppliers in Columbia.”
Does FDI Facilitate Domestic Entry? Evidence from the Czech Republic (2010, unknown): “Third, as discussed in Kugler (2005), foreign firms in manufacturing tend to have higher”
MNE linkages in international business: A framework for analysis (2009, background): “FDI spillovers refer to externalities arising from the presence of MNEs (Blomström & Kokko, 1998: p. 5), and their existence provides a theoretical basis for FDI-assisted development of indigenous firms (Hoekman & Smarzynska Javorcik, 2006; Kugler, 2006).”
Impact of Firm Heterogeneity on Direct and Spillover Effects of FDI: Micro Evidence from Ten Transition Countries (2013, unknown): “Blalock (2001) finds positive productivity spillovers from FDI in upstream industries in Indonesia; Schoors and van der Tool (2001) find positive vertical spillovers in Hungary; Kugler (2006) finds FDI knowledge spillovers between but not within industries of the Colombian manufacturing sector; Smar”
Subsidiary roles, vertical linkages and economic development: Lessons from transition economies (2009, background): “Vertical linkages can be assumed to promote economic development (Hoekman & Javorcik Smarzynska, 2006; Kugler, 2006; Lall, 1996; Moran, Graham, & Blomström, 2005; Scott-Kennel & Enderwick, 2005), particularly in transition economies, which exhibit high participation of MNEs in economic activity (Cam”
Estimating vertical spillovers from FDI: Why results vary and what the true effect is (2011, background): “We excluded a few studies that estimated vertical spillovers but did not define linkages as a ratio and thus could not be used to compute semi-elasticity (for example, Kugler, 2006; Bitzer et al., 2008).”
Innovation and productivity in formal and informal firms in Ghana (2017, unknown): “First, innovation can be stimulated by government policies that aim at supporting firms financially, as financial constraints show up as one of the major impediments to innovation (Kimura, 2011; Kugler, 2006).”