Technological spillovers from multinational firms

Andrés Barge‐Gil,Ramón Núñez‐Sánchez,Alberto López

doi:10.1111/twec.13001

Andrés Barge‐Gil, Ramón Núñez‐Sánchez + Show 1 more

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https://doi.org/10.1111/twec.13001

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Abstract

AbstractThis paper aims to identify genuine technological spillovers from multinational firms (MNEs). To this end, we use data on R&D from MNEs to measure spillovers, while most of the existing literature uses output to measure the foreign presence in an industry (what we call output‐based spillovers). In line with the existing literature, we distinguish between horizontal spillovers (i.e., intra‐industry linkages) and vertical spillovers (i.e., backward—or downstream—and forward—or upstream—inter‐industry linkages). Our results show that the three types of technological spillovers from MNEs are positive, with the horizontal spillovers the larger ones, followed by backward spillovers. The effect of forward spillovers is much smaller in magnitude. Moreover, we find that not controlling for industry size (i.e., technological spillovers from all firms in an industry) leads to underestimating both horizontal and backward spillovers from MNEs, and to overestimating forward spillovers from MNEs. Finally, we find that the distinction between technological and output‐based spillovers is of great relevance. The size of backward technological spillovers is approximately 44% of the size of output‐based backward spillovers, while for horizontal spillovers both types of spillovers are quite similar. Importantly, output‐based forward spillovers are negative while technological forward spillovers are positive.

Highlights

Since the pioneering work by Caves (1974), a large body of empirical literature in international economics has focused on analyzing productivity spillovers from foreign affiliates to domestic firms
It should be noted that the larger industries show a greater presence of multinationals, so the omission of this relevant confounding factor has the important consequence that the spillovers coefficients in columns (3) and (6) confound the effect of multinationals and the effect of industry size 12
And different from previous literature, we find that the three types of technological spillovers from MNEs are positive, with the horizontal spillovers the larger ones (a 1% increase of R&D by multinationals in the same industry is related to a 0.22% increase in focal firm productivity in the OP specification), followed by backward spillovers (a 1% increase of R&D by multinationals in downstream industries is related to a 0.15% increase in focal firm productivity)

Summary

Introduction

Since the pioneering work by Caves (1974), a large body of empirical literature in international economics has focused on analyzing productivity spillovers from foreign affiliates to domestic firms. Studies focused on horizontal spillovers (i.e., intra-industry linkages), while more recent studies analyze vertical spillovers (i.e., inter-industry spillover linkages from buyers to suppliers and from suppliers to buyers) In this large and still growing literature, the empirical evidence is not conclusive. The lack of robust evidence for spillovers from multinational firms may be explained by differences in the way linkages between foreign affiliates and domestic firms are measured. In this sense, the correct measure of this type of spillover is still debated in the literature. Output produced by multinational firms is a reasonably good measure of foreign presence in an industry, its interpretation as genuine technological spillovers is not straightforward

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