FDI Spillovers Research Articles

FDI and product and process innovation of SMEs in Vietnam: The role of institutions

AbstractConceptually, institutional arrangements in the host economy are likely to moderate the effect of inward FDI on domestic firms' product and process innovation, which is however not well explored empirically. Filling the gap, this research investigates how such FDI impacts are contingent upon local institutional arrangements, using survey data of 2690 manufacturing SMEs in Vietnam in 2011, 2013 and 2015. We find that institutional quality exerts positive moderating effects on FDI spillovers. That is, higher institutional quality leads to a higher marginal effect of FDI presence on the innovation performance of domestic SMEs. The moderating effects are stronger for developed‐country FDI than for developing‐country FDI. We also distinguish different institutional components and find that seven out of nine institutional sub‐indices have significant moderating effects, of which the control of corruption is the most important factor in promoting FDI spillovers, whilst the effects of business support and labour training policies are negligible.

The determinants of gender spillovers in FDI: An analysis of Namibia

This paper examines the effect of foreign firm characteristics on FDI spillovers in Namibia, with a specific focus on gender spillover, as an additional measure to total labour spillover. Also, the possible differing spillovers in the manufacturing and services firms are investigated. Using data from the World Bank Enterprise Survey for 2006 and 2014, the paper finds that the gender spillover is significantly influenced by four variables; sector, firm age, transport challenges, and supply-chain finance. Relative to the services sector, firms in the manufacturing sector are found to significantly drive gender spillovers due to a probable preference for females “nimble fingers”, perceived obedience, and lower wages. However, the paper documents that older firms, especially those in the manufacturing sector, negatively impact gender spillovers. Also, transport challenges are shown to drive gender spillovers. This result arises from the possibility that they impose an opportunity cost, whereby, firms may defer investing in female labour due to lower perceived wages to compensate for high transport costs. Finally, we document a negative influence of supply-chain finance on gender spillovers, arising from possible labour cuts as MNCs outsource jobs in the supply chain.

Unveiling the role of different types of local absorptive capacity: The effects of inward FDI spillovers on regional innovation

The aim of our paper is to examine the role of different types of local absorptive capacity in moderating the relation between inward FDI spillovers and regional innovation. We use data on the investments of multinational companies (MNCs) in Brazilian regions from 2003 to 2014, linking them to regional innovative performance. Our results reveal that the transfer of technological knowledge from MNCs to local firms cannot be taken for granted since the positive effects of inward FDI spillovers on regional innovation occur when the new knowledge provided by inward FDI can be associated with the existing capabilities of local actors. The different types of absorptive capacity among local actors have diverse effects on their ability to benefit from inward FDI spillovers. Our findings reveal the distinct moderating effects of firm and local institutions capabilities, indicating that firms' absorptive capacity can derive greater benefits from the new knowledge provided by inward FDI. Finally, our study provides new empirical evidence of inward FDI spillovers and sheds new light on regional FDI attraction policies.

Disentangling the impact of foreign bank presence on domestic banks performance: Does the degree of foreign ownership in domestic banks matter?

While extant studies typically measure foreign bank presence only considering the percentage share of foreign-owned banks among the banking industry of one country, there comes one interesting question: whether the impact of the micro-level foreign presence, i.e. foreign investment in domestic banks, may be similar? Drawing on theoretical arguments from FDI spillover and corporate governance, this paper hypothesizes that macro-level foreign bank presence mainly threatens domestic banks’ performance due to increased competition, whereas micro-level foreign presence enhances banks’ efficiency. Empirical analyses based on a cross-country bank-level dataset from 2002 to 2020 support these hypotheses. The mechanism analysis shows that macro-level foreign presence hampers domestic banks’ outputs, while micro-level foreign presence helps reduce banks’ input prices. Furthermore, the impact of macro-level foreign presence is more pronounced in less developed economies, while the positive impact of micro-level foreign presence is significant in more developed economies or those with low banking concentration. Our findings enrich the literature on foreign bank presence by considering micro-level foreign investment in domestic banks, and expand the FDI and corporate governance literature by incorporating the banking context.

Motivation in New Ventures for FDI Spillovers Absorption: The Role of Performance Feedback

Motivation in New Ventures for FDI Spillovers Absorption: The Role of Performance Feedback

FDI spillovers on Colombian Multilatinas: Upgrading capabilities through indirect ties and humbleness

This study examines how Colombian Multilatinas leverage spillovers from foreign direct investments to enhance their capabilities and expand internationally. Employing a qualitative, exploratory multi-case study approach grounded in inter-organizational learning theory, we find that indirect ties, through vicarious learning via observation and emulation, are pivotal in facilitating the acquisition of new knowledge. This learning is key for Multilatinas to improve their technological and organizational capabilities locally, thereby strengthening their position in global markets. In addition, our analysis reveals that the challenges inherent to the Colombian context encourage a distinctive internationalization model characterized by humility and collaborative partnerships. These findings offer actionable insights for managers aiming to leverage international spillovers for capability development and global growth. JEL CLASSIFICATION: M16; M21; M14

Do Free Trade Agreements Facilitate FDI Spillover Effects on Domestic Firms? Empirical Evidence from Oman

This paper underlines the significance of free trade agreements in attracting foreign direct investment and their impact on the operational capacities of local firms in host countries. It argues that free trade agreements do not only eliminate barriers to trade, but they also increase the size of the regional market and improve the business environment, making it more attractive to foreign direct investment, along with all the attributes and spillover effects associated with it. While determining the type of spillover effects of foreign direct investment associated with Oman’s trade agreements, this paper uses the Kruskal–Wallis H-test and 438 samples from companies surveyed between 1 August and 31 October 2023 to assess the impact of spillovers on the performance of the surveyed companies. The results reveal that technology transfer, knowledge transfer, labour productivity, product efficiency, capital investments, and job creation have positive effects on the firms’ operational capacities, with technology transfer having the highest impact (27%), followed by labour productivity and job creation (18%). The spillover effects are almost the same for company size and percentage of ownership. They also identified manufacturing and tourism as priority sectors and the availability of a skilled workforce as a major challenge. These findings make original contribution to the field as this is probably the first study to produce a firm-level analysis of spillover effects of foreign direct investment and trade agreements in the context of Oman and the wider Gulf region. The paper concludes with practical implications for policy makers when negotiating trade agreements and designing investment policies to optimize spillover effects on the performance of their domestic firms.

Mediating factors and spillover effects of foreign direct investment : Evidence from Indian manufacturing firms

The present study examines the extent and direction of horizontal, backward and forward spillover effects of FDIs on firms' productivity. It also shows how the mediating factors (firm's age, export and import intensity, R&D and advertisement intensity) contribute to the firms' productivity. Further, the study also uncovers the importance of the ownership patterns of the firms that affect the spillovers. It uses a balanced firm-level panel data set from the Indian manufacturing industries over the available period 2003 to 2016 to examine the inter- and intra-industry spillovers of the FDIs. The estimation methods used in this study are the fixed effects approach and the generalised method of moments. The study also applies the Levinsohn-Petrin method to compute firm-level productivity. It finds a significant positive spillover backward effect and confirms the supportive role of the mediating factors in augmenting the spillover channels. However, the results do not support the existence of horizontal and forward FDI spillover effects for the overall manufacturing industries. They suggest that a comprehensive policy package approach be used, thereby underlining the importance of all channels of the FDI spillover effects and their relations to the downstream sector, particularly by keeping the performance of the firms and their external links in perspective.

PENGUJIAN BESARAN PERGESERAN LABA PERUSAHAAN MULTINASIONAL DENGAN MOTIF PERPAJAKAN DI ASEAN: STUDI FDI TIPOLOGI

This study aims to examine the magnitude of outbound profit-shifting by multinational enterprises (MNEs) across different investment types in the ASEAN. Using ORBIS data from 2013 to 2018, a pooled least squares panel data analysis is conducted. Results indicate that investment activities aimed at achieving higher efficiency demonstrate greater elasticity regarding profit-shifting behavior. Notably, policymakers should focus on the manufacturing sector, where profit-shifting practices are more common in efficiency-seeking investments. Nevertheless, governments need to balance regulatory efforts and policies to attract foreign direct investment due to the potential benefits of FDI spillovers and the risks of profit-shifting activities. Achieving this balance is a critical challenge.

FDI Spillover Effects, Indigenous Innovation Capability, and Regional Industrial Structure Adjustment

This article, based on the perspective of regional economics, utilizes data from the Beijing-Tianjin-Hebei urban agglomeration from 2013 to 2021. It establishes a dynamic panel model and introduces interaction terms between FDI spillover effects and indigenous innovation capability. Through empirical analysis, it examines the impacts of FDI spillover effects, indigenous innovation capability, and their interaction on the industrial structure of the Beijing-Tianjin-Hebei region.The research findings indicate that after introducing the interaction term,FDI promotes the enhancement of indigenous innovation capability, thereby optimizing the industrial structure with a noticeable synergistic effect. Therefore, leveraging the synergistic effect of FDI and indigenous innovation on the optimization and upgrading of the industrial structure is of significant importance for the high-quality development of the Beijing-Tianjin-Hebei urban agglomeration.

Corruption, Growth, and FDI Spillovers: Evidence from Emerging Market Economies

Countries with substantial increases in economic growth and similar characteristics to developed countries are usually referred to as emerging markets. The problem faced by emerging market countries is the need for more capital investment into the country so that domestic savings are added through efforts to find buy and imports. This study looks at the effect of economic growth, trade openness, control of corruption, and regulatory quality on FDI, specifically in developing countries. The analysis method used the Generalised Method of Moments panel. The data used from 2014-2021 with the analysis areas of Indonesia, Malaysia, the Philippines and Thailand. The results showed that the economic growth variable had a positive and significant effect on FDI, the trade openness variable had a negative and significant effect on FDI, the control of cor-ruption variable had a negative and significant effect on FDI, and the regulatory quality variable had a positive and significant effect on FDI in ASEAN emerging market countries.
 Keywords: Growth, Trade openness, Control of corruption, and Regulatory quality

Productivity Growth Effects of FDI Spillovers: Evidence from the Türkiye Manufacturing Industries

This study explores the productivity growth effects of horizontal, backward, and forward FDI spillovers in the Türkiye manufacturing sector using industry-level data for the period 2008–2018. While controlling for capital intensity and human capital as proxies for the absorption capacity, we apply system GMM and bootstrapped LSDV estimator to estimate the models. Our findings reveal that backward linkages significantly hamper industrial productivity due to the rudimentary nature of the products in the downstream sector or lack of absorption capacity. While horizontal spillovers retard the productivity growth; forward linkages enhance the growth, though all insignificant. The results depict that all the interactions with capital intensity strongly promote industrial productivity growth.

Subnational Institutional Differences, R&D-Performance Relationship, and FDI Spillovers in Russia

Subnational Institutional Differences, R&D-Performance Relationship, and FDI Spillovers in Russia

FDI spillovers and productivity in Vietnamese manufacturing industries - new insights from the unconditional quantile regression

ABSTRACT This research investigates the effects of FDI spillovers on the productivity of domestic firms by relying on unconditional quantile regression. Using panel data of Vietnamese enterprises over the period 2000–2012, we find evidence of positive spillovers for firms at the lower tails and negative spillovers for those at the upper tails of the productivity distribution. Time and the firm’s legal status are other factors determining the effect of FDI spillovers. Notably, only low productivity state-own enterprises benefit from positive horizontal spillovers, but in the long run rather than in the short run.

COGNITIVE BACKGROUND OF VERTICAL FDI SPILLOVERS: AWARENESS MOTIVATION COGNITIVE CAPACITY

This study aims to investigate how the awareness, motivation, and capacity of local organizations affect vertical FDI spillovers in the Turkish automotive industry within the framework of institutional theory. A multiple case study method was used in this study, in which interviews, observations, and documents of seven local supplier organizations were subjected to content analysis. The findings show that the expectations of multinational companies for efficiency in buyer-supplier relationships have limited the awareness, motivation and capacity of local suppliers for internationalization and innovation. This situation prevents local organizations, especially those located at the lower rungs of the supply chain, from capturing the positive effects of vertical FDI spillovers.

The hare and the tortoise: A comparative study of Vietnam's and Kenya's pathways to local enterprise development through foreign direct investment

ABSTRACT Almost simultaneously, two developing countries – Kenya and Vietnam – set out to promote industrial development through FDI. Vietnam embarked on a targeted strategy aimed at selecting FDI that could specifically aid the country’s strategic export sectors through linkages to local industry. In contrast, Kenya embarked on a cross-the-board FDI attraction policy with no specific sector orientation and with few specific linkage policies. This paper asks how FDI has contributed to local industry development in the two countries. Based on an analysis of firm level data from the World Bank Enterprise Survey, the paper compares the two countries’ ability to generate spillovers from FDI spillovers and discusses what explains differences and similarities. The paper finds that in spite of the obvious differences between the two countries in terms of local industrial development and policy, firm and industry factors appeared to be better predictors of variations in spillovers than country level factors. Among the policy implications drawn are that developing countries should focus their FDI policies on firms and industries that have high linkage and hence spillover potential rather than adopting cross-the-board policies.

Does FDI bring knowledge externalities for host country firms to develop complex technologies? The catalytic role of overseas returnee clustering structures

Prior research has extensively studied FDI spillovers on broadly defined technological innovation but offered inconclusive evidence. Relatively little is known about how the knowledge characteristics of local technological development are shaped by FDI and the innovation context where this development takes place. We therefore study the influence of FDI presence on host country firms' technological progress with a focus on two factors: the underlying technological characteristic, complexity, which reflects the difficulties in recombining diverse knowledge combination for innovation, and an under-studied contextual contingency: the local clustering of returnees (skilled returned migrants) that creates different interactive environments for incorporating foreign knowledge. Using a unique sample of 35,376 firms over an 11-year period in China's equivalent of Silicon Valley, Zhongguancun, we reveal that FDI exerts a curvilinear spillover effect on local firms' technological complexity. Furthermore, we find returnees' clustering in related sectors heightens the effect of FDI spillovers on local technological complexity, whereas unrelated sectoral clustering flattens this U-shaped relationship, reducing FDI spillovers. We add to the debate on FDI knowledge externalities by highlighting the importance of considering knowledge characteristics and the contextual setting of returnee clustering in understanding FDI spillover effects on local technological progress. Theoretical and practical implications are discussed.

FDI and Superstar Spillovers: Evidence from Firm-to-Firm Transactions

FDI and Superstar Spillovers: Evidence from Firm-to-Firm Transactions

The effects of FDI on innovative entrepreneurship: A regional-level study

A growing number of studies report findings on FDI's impacts on entrepreneurship activities in the host country, but less attention is given to the question of how FDI spills over to different types of entrepreneurship. This study empirically tests how FDI innovation activities influence innovative entrepreneurship entry and growth. Fixed-effect panel data analysis was applied to examine original field data from multiple official databases in China in 31 provinces from 1998 to 2007. The study shows that FDI innovation activities increase innovative entrepreneurship entry. The relationship is positively moderated by IPR protection. Moreover, FDI innovation activities also promote entrepreneurial growth. These findings contribute to a better understanding of dissimilar FDI spillovers to different entrepreneurship types. Such insights help expand the theoretical and practical research of FDI spillover on entrepreneurship from entrepreneurship as a whole to the attributes and processes of entrepreneurship.

The FDI-spawned technological spillover effects on innovation quality of local enterprises: evidence from industrial firms and the patents in China

ABSTRACT Foreign direct investment is a topic of crucial importance for emerging market countries for capital accumulation, innovation and sustainable development. From the perspective of technological innovation, the article explores how ‘desirable’ the FDI is in stimulating domestic innovation. Using industrial firm-level data from 1998 to 2013 combined with patent database from China National Intellectual Property Administration and patent citations from Google Patents, the article captures the significant impact of innovation quality of regional FDI on the innovation quality of local firms with both multi-fixed effects and instrumental variable estimations, which are proved to be reliable with robustness checks. Further, under different entry modes, the article finds that M&A FDI plays a more positive role in spillovers compared with greenfield investment. Finally, the article explores the upstream and downstream linkage benefits and intra-industrial benefit from FDI innovation, which shows that the intra-industrial benefit, or the demonstration effect is prominent. Our article renders a more direct micro evidence of FDI spillovers and sheds light on FDI attracting policies.