Abstract
This paper aims to investigate whether the presence of foreign direct investment (FDI) delivers positive externalities to domestic firms in the same industry and region using recent detailed panel data for 87,195 Vietnamese firms from 2010 to 2015 and an aggregate input-output matrix. The results indicate that domestic firms in Northern Vietnam are positively affected by intra-industry FDI but negatively affected by intra-region FDI. Interestingly, FDI within both the same industry and region benefits domestic firms in the Central coast region but has insignificant effects in other geographical areas. Finally, while domestically owned and, to a lesser extent, joint-venture firms suffer from the presence of FDI within the same industry, they benefit from intra-region horizontal spillover. These findings have implications for policy makers and authorities seeking to attract FDI for continued economic growth in Vietnam that also benefits domestic firms.
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