Governance, Information Spillovers, and Productivity of Local Firms: Toward an Integrated Approach to Foreign Direct Investment and Global Value Chains

Abstract

Information spillovers from multinational enterprises to local firms in developing countries are examined in the literature on global value chains and foreign direct investment. However, global value chain studies and foreign direct investment studies are carried out independently and separately. While global value chain studies describe an important mechanism that underlies the productivity improvements of local firms in developing countries, most foreign direct investment studies attempt to assess econometrically the impacts on the productivity of local firms. This survey article concludes that an integrated approach incorporating the insightful perspective of global value chain studies into the empirical approach of foreign direct investment studies will likely reveal the channel through which information spillovers lead to the productivity improvements of local firms in developing countries.