Is acquisition‐related foreign direct investment during an economic crisis detrimental for domestic innovation?

The overall aim of this thesis is to investigate, theoretically and empirically, the impacts of foreign direct investment (FDI) on the host labour market. Specific objectives focus on exploring the role of FDI firms in determining wages and the employment of female workers (hereafter referred to as female employment) by domestic firms, using the empirical case of the services sector in Vietnam. While the literature suggests that foreign firms, especially large multinationals, tend to pay higher and employ women more intensively than local firms, there is scant evidence on whether and how FDI firms can influence domestic firms' wages and gendered employment, notably in the context of service industries. This thesis contributes to filling these knowledge gaps from both theoretical and empirical grounds. To realise the research objectives, I constructed two theoretical models to illustrate how the presence of FDI firms can be a determinant of local firms' pay and employment decisions. The first model shows that foreign presence can influence the expected average wage of domestic firms (causing so-called 'wage spillovers') through two contrasting channels, namely productivity spillovers and cut-off capability. The second model shows that FDI firms can affect domestic firms' female employment (measured by female-to-male labour ratio), directly via augmented female productivity spillovers and indirectly via the cut-off effect. The ultimate impact of foreign presence on wage and female employment depend on the relative strength of the two channels. Guided by the theoretical frameworks, I then specified two econometric models to empirically test and estimate the impacts of FDI firms on average wage and female employment of domestic counterparts. The empirical analyses utilise rich panel datasets of firms in Vietnam's services sector over the five-year period 2009-2013, which were extracted from the enterprise survey database of the General Statistics Office (GSO). In the specified models, foreign presence is the variable of interest and measured by the employment share of FDI firms in an industry, region and year. To address the potential endogeneity problem, I utilised the Generalised Method of Moments with Instrumental Variable (IV-GMM) estimation technique. Of this method, I adopted a novel approach to constructing IVs, which capitalises on the geographical and industry segmentation of the local labour market. In the estimation procedure, I conducted a number of diagnostic checking, including the endogeneity test, underidentification and overidentification tests (for the relevance and validity of selected instruments), and accounted for multicollinearity, autocorrelation, and heteroskedasticy problems. The estimation results indicate that FDI firms exert positive and statistically significant impacts on the pay level and female employment of domestic firms in Vietnam's services sector. Specifically, a one per cent increase in foreign presence induces local firms to raise their real wage and female-to-male labour ratio by 1.15 per cent and 2.18 per cent on average, respectively. The findings also suggest that higher paying firms tend to be larger, state owned, more capital intensive, and well established. Additionally, smaller, privately owned, less labour-intensive firms are more likely to hire women at a higher rate. To provide deeper insights into the heterogeneity of FDI-linked impacts, I extended the analysis by examining different layers of disaggregation. Notably, at the two-digit Vietnam SIC level, the scatterplots of the data and the estimation results reveal divergent effects of foreign presence on domestic firms' wages (positive in the high-wage group and negative in the low-wage group), and female employment (positive in the male-intensive group and insignificant in the female-intensive group). Likewise, additional investigations at the three-digit level show heterogeneous FDI impacts, depending on specific characteristics of domestic and foreign firms. While the existence of positive FDI impacts at the overall sector level may imply services FDI attraction as a viable strategy to improve local wages and promote female employment opportunities, the findings of heterogeneous effects warrant a more cautious and selective approach to be adopted by local firms, workers and governments in policy and decision formulation.

Purpose This paper assesses the impacts of big data analytics expertise (BDAE) on the sustainable supply chain performance (SSCP) of domestic and foreign direct investment (FDI) firms in Vietnam’s emerging economy. It examines whether supply chain risk management (SCRM) moderates the impacts of BDAE on SSCP. Design/methodology/approach This study compiles data from 372 domestic and FDI firms. The proposed hypotheses are tested using partial least squares structural equation modeling (PLS-SEM). Findings The findings verify significant effects of BDAE on environmental performance (SSCP-ENV), economic performance (SSCP-ECO) and social performance (SSCP-SOC) for FDI firms. The results also confirm significant impacts of BDAE on SSCP-ECO and SSCP-SOC for domestic firms. SCRM exhibits only significant moderation in the effects of BDAE on SSCP-ENV and SSCP-ECO for domestic firms, while no moderation of SCRM is found for FDI firms. Practical implications This study has managerial implications for managers in domestic and FDI firms regarding the direct role of BDAE and the moderating role of SCRM in enhancing the SSCP. It also improves the understanding of SSCP, BDAE and SCRM in an emerging market for the two firm categories. Social implications It is, therefore, concentrating on BDAE is a key strategy that Vietnamese enterprises apply to gain a competitive edge. Those companies may hire personnel with BDA abilities and/or provide BDA training programs to help employees do their jobs. Employee competence in BDA may be seen as a beneficial resource for boosting social performance. The implementation of BDA has been shown to enhance the social aspects of SCM (social values and ethics, worker safety and human rights, etc.). Enterprises are advised to use the BDAE to carry out activities that benefit workers and suppliers while addressing the needs of all stakeholders. Originality/value The original value is derived from the understanding of how BDAE affects SSCP for domestic and FDI firms in Vietnam. It is further highlighted by the inclusion of a recently discovered mechanism demonstrating the moderation of SCRM on the relationship between BDAE and SSCP. These contributions are of interest to business professionals and academics.

Global Links: Multinationals in Canada: An Overview of Research at Statistics Canada

The repercussions of business cycles on renewable & non-renewable energy consumption structure: Evidence from OECD countries

The effect of investor origin on firm performance: Domestic and foreign direct investment in the United States

Chinese firms are facing a dilemma where innovation is growing rapidly in quantity but is of low quality. This paper utilizes the revision of the ‘Catalogue for the Guidance of Foreign Direct Investment (FDI) Industries’ in 2002 as a quasi-natural experiment and examines the effect of FDI deregulations on the innovation quality of domestic firms using firm-level data from 1998 to 2007. Employing a difference-in-differences strategy, we find that FDI deregulations significantly expand the firms’ patent breadth, indicating an enhancement in innovation quality. Our empirical evidence further indicates that FDI deregulations do not lead to significant negative competition effects; instead, technology spillovers play a dominant role. FDI inflows strengthen firms’ absorptive capacity and promote the shift of labor from foreign-invested enterprises to domestic firms. More importantly, we distinguish between two types of FDI liberalization policies and find that policies encouraging FDI entry serve as a driving force for enhancing firm innovation quality. This paper emphasizes the significance of FDI deregulations for firm innovation, offering empirical evidence on how developing countries can undertake FDI regulatory reforms to enhance innovation quality.

This study aimed at unveiling the pains and gains of domestic firms towards Foreign Direct Investment in the Sub-Saharan Africa. The objectives of the study were to ascertain the effect of inward Foreign Direct Investment on Domestic Firms, and to establish gulfs between gains and pains of Domestic Firms in Sub-Saharan Africa relative to technology spillover, competition, environmental degradation and Global Value Chains. The study used a systematic review. This enables the drawing of experience, ideas, and similar situations of others. Search strategy was incorporated to enable the searching of literature in database of reputable journals. It was discovered that the volume of Foreign Direct Investment is high in Sub-Saharan Africa, and that it has greater positive effect on Domestic Firms. It was established that Foreign Direct Investment presents gains as well as pains to Domestic Firms in Sub-Saharan Africa relative to technology spillover, competition, environmental degradation and Global Value Chains. The study concluded that Foreign Direct Investment is not totally inimical to Domestic Firms in SSA. Thus, the study suggested that government of various countries in Sub-Saharan Africa should revisit and review their policies, where necessary, to protect their infant firms or Domestic Firms, and should intervene in the drain experienced by Domestic Firms, and cushion the negative impact of technology spillover by providing capital support and enhancing strong institutional quality.

Trade liberalizations have been shown to improve domestic firms' performance through the new varieties of imported intermediate inputs. This paper uses a unique, representative sample of Bangladeshi garment firms to highlight that local intermediate inputs may also enhance domestic firms' performance, through the shared supplier spillovers of foreign direct investment (FDI) firms. An exogenous EU trade policy shock is shown to cause some FDI firms in Bangladesh to expand, which led to better performance of the domestic firms that shared their suppliers. Overall, the shared supplier spillovers of FDI explain 1/4 of the product scope expansion and 1/3 of the productivity gains within domestic firms.

Trade liberalizations have been shown to improve domestic firms' performance through the new varieties of imported intermediate inputs. This paper uses a unique, representative sample of Bangladeshi garment firms to highlight that local intermediate inputs may also enhance domestic firms' performance, through the shared supplier spillovers of foreign direct investment (FDI) firms. An exogenous EU trade policy shock is shown to cause some FDI firms in Bangladesh to expand, which led to better performance of the domestic firms that shared their suppliers. Overall, the shared supplier spillovers of FDI explain 1/4 of the product scope expansion and 1/3 of the productivity gains within domestic firms.

This paper studies the impact of foreign direct investment on domestic firms’ innovation in China. It provides causal evidence by exploiting China’s foreign direct investment deregulation in 2002 and employs a difference-in-difference estimation strategy. Using a matched firm-patent data set from 1998 to 2007, the results show that the quantity and quality of domestic firms’ innovation benefit from foreign direct investment. Moreover, the paper emphasizes the importance of knowledge spillover from foreign direct investment in similar technology domains. The analysis examines the role of horizontal foreign direct investment and foreign direct investment in technologically close industries—industries that share similar technology domains. The findings show that foreign direct investment in technologically close industries generates much bigger positive spillovers than horizontal foreign direct investment. The paper also shows that knowledge spillover from foreign direct investment in similar technology domains is not driven by input-out linkages. Moreover, the spillover effect is stronger in cities with higher human capital stock and firms with higher absorptive capacity.

M ULTINATIONAL Corporations (MNCs) may invest in a host country when they possess ‘non-tangible productive assets’ that cannot be easily licensed but can be transferred within the firm. Direct equity participation in the host country is therefore required for MNCs to reap the rents from their nontangible productive assets, which may include technological know-how, marketing and managing skills, relationships with suppliers and customers, and reputation. If foreign direct investment (FDI) does effectively convey these assets, we should expect FDI to boost the productivity of the host country firms that receive FDI. A more complex issue is the indirect spillover effects of FDI to non-FDI domestic firms. To the extent that FDI may bring new products and technologies to the host country, non-FDI receiving domestic firms may also stand to benefit from FDI through personnel turnover, demonstration effects and knowledge spillovers. The presence of FDI in a certain industry, however, may exert adverse effect on domestic firms in that industry. By enjoying better technologies and lower production costs, firms with FDI may cut into the market share of domestic firms without FDI. In a short run imperfectly competitive market structure, the productivity of domestic firms may be reduced when sales fall, so that fixed costs are spread over fewer units. In the long run, however, the increased competition induced by the increased presence of FDI in domestic industries may force

This paper takes a firm-level perspective to analyze foreign direct investment (FDI) in the European Union (EU). Our data rely on the global company database Orbis and allow the introduction of an original definition of FDI that accounts for the FDI direction – inward vs. outward – and the FDI margin – extensive vs. intensive. Based on the available information, we ask two questions. First, how deep is the FDI involvement of European enterprises? Second, is there any systematic relationship between FDI involvement and firm-level performance? To answer these questions, we adopt an empirical methodology consisting of descriptive statistics and econometric regressions (Probit, Bivariate Probit, and Poisson models). Concerning the depth of FDI involvement, our descriptive statistics reveal that the number of firms involved in inward/outward FDI is quite notable. However, firms’ actual involvement is rather low, meaning that FDI involvement in the EU is widespread, but not deep. Concerning the relationship between FDI involvement and firm-level performance, our econometric regressions show that better enterprises experience some inward/outward FDI rather than none. Moreover, the deeper the FDI involvement, the wider is the gap with domestic firms. This suggests that performance differentials are related to both the extensive and intensive margins of both inward and outward FDI.

The study investigates how Nigeria’s economic fluctuations shape energy consumption patterns, focusing on the interplay between business cycles, foreign direct investment (FDI), and energy intensity. Key questions include: how business cycles influence energy use, whether FDI exhibits cyclical behavior with the economy, and the extent to which FDI mediates the business cycle–energy intensity relationship. Using annual data from the World Development Indicators (1971–2022) on GDP per capita, urbanization, ecological footprint, and energy intensity, the analysis applies unit root tests, ARDL bounds testing, and post-estimation diagnostics. Results reveal that the business cycle has a negative effect on energy consumption, while FDI tends to amplify business cycles. However, FDI’s moderating effect on the business cycle–energy intensity link is insignificant. Urbanization and trade openness significantly influence energy intensity. The findings suggest a counter-cyclical link between business cycles and energy use, a pro-cyclical connection between FDI and economic cycles, and limited combined effects of FDI and business cycles on energy intensity. Policy recommendations include strengthening early detection and monitoring of business cycles to tailor energy policies to different economic phases and ensuring that FDI inflows do not exacerbate environmental degradation. Nigeria is urged to avoid sacrificing environmental quality for economic gains when leveraging foreign investment.

Increasing neo-liberalization of national economies during the last three decades has established global interdependency as the norm of national economic success, compelling the countries to believe in foreign capital, foreign know-how and foreign markets when driving their nations forward. However, the recent economic crises, similar to what was observed in Sri Lanka, questioned the outward focus economic policies which led to the recession of almost all the national currencies against a ramping Dollar that was predicted to reach its highest growth since 1997 in 2022. Citing these developments, critics argue that the foreign direct investments (FDIs) have failed to build sustainable and resilient national economies and urge individual countries to look inward in their economic policymaking. For instance, most of the Asian countries like India and Sri Lanka who are blessed with a rich sphere of traditional knowledge and practices tend to overlook their centrality in economic development, thereby threatening the small-scale entrepreneurs and local innovators who rely on them. As critics highlight, the Indian government is flagging in supporting litigations in areas like bio-piracy as it would negatively impact the FDIs which have exploited Indians’ collective intellectual property rights. Existing research concerning FDIs has primarily focused on the importance of strengthening intellectual property rights to attract foreign investors, creating a lacuna in understanding its role in safeguarding small scale businesses, as well as in controlling the adverse impacts of FDIs. In light of that, the present study has reviewed India’s recent bilateral and multilateral investment treaties and policies to understand the direction of their approach towards FDIs. To that end, this study has reviewed India’s Consolidated FDI Policy (2020), and recent bilateral and partnership agreements during the last decade, while drawing from recent case studies, reports and news bulletins that concern the above. It also utilised Sri Lanka’s economic crisis as a case study to realise the adverse impacts of heavily relying on FDIs which makes it challenging to nurture a home-grown economic culture. Through its data analysis, the present study observes that India favours a classical approach to foreign investments which supports an outward focused FDI policy, thereby fostering an unhealthy economic environment that threatens the survival of small and traditional entrepreneurs, while opening doors for the exploitation of its traditional knowledge and practices in the hands of the foreign investors. Therefore, this study discusses how the incorporation of intellectual property rights like patents, traditional knowledge and unfair competition into the regime of FDIs may help India, whose reliance on foreign investments has grown exponentially over the last two decades, to realise and promote a more self-reliant and home-grown economic policy. Furthermore, it also elaborates how the Sri Lankan economic crisis becomes exemplary in envisioning a sustainable economy for not only its big brother, India, but also for other countries in the South Asian region. Finally, it examines how such developments in the Indian economy become central to redefine the economic future of South Asia, considering India’s overarching influence on the region and on the individual neighbouring countries who are also developing nations with fast growing economies. Keywords: Foreign direct investments, intellectual property laws, Sri Lankan economic crisis, India

A general equilibrium analysis of FDI growth in Chinese services sectors