Horizontal Spillover Effects Research Articles

Spillover effects of foreign and domestic exporting firms on export decisions of local manufacturing firms: Evidence from Vietnam

Our study examines the spillover effects that arise from foreign and domestic exporting firms on the export decisions of local manufacturing firms in Vietnam between 2010 and 2018. There are positive horizontal spillover effects from both foreign and domestic exporting firms, while negative spillover effects are detected through the backward channel. Domestic exporting firms are found to generate positive forward spillover effects, whereas foreign direct investment exporting firms have negative forward spillover effects. Moreover, we observe opposite spillover effects from foreign and domestic exporting firms on the export exit of domestic firms, with a negative impact under the horizontal channel and a positive impact under the backward channel. Our research also reveals the effects of firms’ characteristics on the export participation and exit of domestic firms. The study suggests that the Vietnamese government should focus on enabling the FDI sector to create positive spillover effects, attracting foreign firms with export potential as well as supporting domestic exporting firms using and providing local intermediate inputs, and improving the technological and absorptive capabilities of domestic firms.

Is FDI a potential tool for boosting firm’s performance? Firm level evidence from Ecuador

In developing countries, the evidence regarding the direct and indirect effects of FDI on economic and financial performance at the firm level is mixed. To contribute to this literature, we provide empirical evidence of direct and indirect effects of FDI on firm’s performance, using return on assets (ROA), gross revenues and gross revenues growth rate as performance measures. We examine the private formal enterprise sector in Ecuador from 2007 to 2018. Our identification strategy relies on the use of the Generalized Method of Moments (GMM) methodology for dynamic panel data which allows us to control for potential endogeneity, autocorrelation and heteroskedasticity issues. The results suggest that firms with inward FDI grow faster than their counterparts, and firms with higher amounts of FDI as a share of total revenues have on average higher levels of gross revenues. Moreover, we find negative horizontal wages and gross revenues spillover effects on gross revenues growth rates, but positive horizontal gross revenues spillover effects on ROA. There is also significant evidence of negative horizontal spillover effects in all economic sectors, whereas evidence for forward and backward spillovers is heterogeneous across them.

FDI, indirect horizontal spillover and firm productivity in China’s manufacturing industry

ABSTRACT The indirect spillover effects of manufacturing foreign direct investment (FDI) through upstream suppliers are often ignored by academia. This paper first explains theoretically the mechanism of indirect horizontal spillovers from foreign-funded firms and matches China Industry Business Performance Data and the China Customs Dataset, then empirically analyzes the indirect horizontal spillover effects of China’s manufacturing FDI through upstream suppliers. The results show that China’s manufacturing FDI generates significant positive technology spillovers to local firms through an indirect horizontal mechanism; the vertical spillover effects of China’s manufacturing FDI are asymmetric; the indirect spillover effects are influenced by firm ownership, whether it trades or not, and firm size; and the indirect spillovers generated by FDI restrain the quality of products for exports by local firms in the intra-industry but significantly improve the quality of products for export of upstream suppliers through backward linkages.

Research on government subsidy strategies for new drug R&D considering spillover effects

This paper studies the pharmaceutical production supply chain system composed of upstream and downstream pharmaceutical enterprises, and explores the impact of government subsidy strategies on the new drug research and development (R&D) decision variables and profits of pharmaceutical enterprises as well as social welfare, when considering both the horizontal spillover effects within the industry and the vertical spillover effects between industries. Comparing and analyzing the impact of these strategies including non-government subsidy strategy, pharmaceutical enterprise innovation input subsidy strategy, pharmaceutical enterprise innovative product subsidy strategy, patient price subsidy strategy, and patient medical insurance subsidy strategy. By establishing a four-stage Cournot duopoly model incorporating spillover effects, the equilibrium solutions are obtained by backward induction, and the impact of spillover effects on decision variables is investigated accordingly. Studies have shown that: (a) Government subsidy strategies can promote pharmaceutical enterprises’ R&D investment and have a positive incentive effect on the pharmaceutical enterprises’ profits and social welfare. (b) The patient medical insurance subsidy strategy is the optimal subsidy strategy, which can generate higher profits for pharmaceutical enterprises and higher social welfare. (c) The horizontal and vertical spillover effects have different effect on decision variables, enterprises’ profits and social welfare under various subsidy strategies.

Foreign direct investment and productivity spillovers: a firm-level analysis of Bangladesh in comparison with Vietnam

Foreign direct investment (FDI) is expected to generate external effects—usually termed FDI spillovers—for a host country, and these spillovers are thought to have consequences on the productivity of domestic firms. Despite this strong expectation, the empirical findings on FDI spillover are still indecisive. This study examines firm-level panel data to determine the effects of FDI spillover on firms’ productivity in Bangladesh in comparison to Vietnam. We consider both the horizontal and vertical (backward and forward) spillover effects of FDI. We find evidence that Bangladeshi firms gain productivity improvement through intra-industry or horizontal linkages, whereas Vietnamese firms gain through backward linkages. Our findings suggest that increases in foreign presence in the same industry for Bangladesh and in downstream industries for Vietnam are related with increase in output of domestic firms.

Foreign Firm Entry and the Productivity of Japanese Listed Manufacturing Firms: An Analysis of Horizontal Spillover Effects Based on the Location of Foreign Establishments

Foreign Firm Entry and the Productivity of Japanese Listed Manufacturing Firms: An Analysis of Horizontal Spillover Effects Based on the Location of Foreign Establishments

The Vertical Spillover Effect of Online Ratings on Platform Competition: An Empirical Investigation

The familiar ’five-star’ ratings and reviews system makes it easy for consumers to use product evaluations across competing platforms to choose the product or service that is most likely to match their preferences. However, the ability to easily shop around for ratings and reviews raises a question from which platform consumers will then buy the product. We observe that the average rating for the same product can vary between platforms and build on the idea of spillover effects. Marketing literature has analyzed horizontal spillover effects from consumer perceptions of a product, service or a company to the sales of other entities in the same category. By contrast, we argue that diverging evaluations of the same product on different platforms can give rise to a vertical spillover effect that affects platform choice. To study the possible vertical spillover effect, we conduct an experimental study in a restaurant food delivery setting using a combination of incentive aligned behavioral experiments and experiments based on stated preferences method. Our results show that consumers tend to choose the platform where the chosen restaurant is rated higher, which suggests the presence of a vertical spillover effect.

Trade Agreements and Global Value Chains: New Evidence from China’s Belt and Road Initiative

This paper investigates the relationship between China’s trade agreements (TAs) and partner countries’ upgrade in global value chains (GVCs). We focus on the experience of China and relate China’s TAs with one belt and one road (OBOR) initiative. A structural equation model (SEM) is applied on a dataset including 216 countries and regions to identify the direct and indirect effects of China’s TAs and OBOR initiative on its export, outwards foreign direct investment (OFDI) and partner economy’ GVCs upgrade over the period 2010–2015. We find that China’s TA partner countries are more likely to be included in the OBOR initiative than those non-TA partner countries. The positive effects of China’s TAs and OBOR initiative on China’s export, outwards foreign direct investment (OFDI) and partner countries’ upgrade in GVCs differ across country groups at the different locations of GVCs. Both vertical and horizontal spillover effects exist in China’s TAs. Therefore, the partner countries at low end and middle of GVCs might benefit more from TAs with China than those richer countries at the high end of GVCs.

Technological spillover through industrial and regional linkages: Firm-level evidence from China

This paper provides new insights into the study of technology spillover effects through the interaction between industrial and spatial linkages. We develop a theoretical model that provides a useful modeling framework for spillover research, and then empirically test the model inferences using Chinese firm-level data. Input-output tables and spatial decay measurements are combined to construct the key spillover variables. Using seemingly unrelated regressions, the paper finds that vertical spillover effects are more significant than horizontal spillover effects, both within- and between-regions; regional characteristics have greater impacts on vertical spillovers than on horizontal spillovers; and regional spillover effects vary across different regions. Regional policies and regional endowments, including human capital, transportation infrastructure, and enterprise ownership, are crucial in explaining these heterogeneities in regional technology spillover. Our empirical results provide many policy implications including strengthening the connection between upstream and downstream industries and devoting more R&D to upstream industries.

Structural change and agglomeration in the Hungarian pork industry

ABSTRACT The paper analyses agglomeration effects and spatial externalities in the Hungarian hog sector between 2000 and 2010. We apply a spatial lag-spatial error regression model to capture horizontal and vertical spillover effects and to understand the environmental restrictions that determine the location of pork production at the municipality level. Due to the dual nature of the structure of the Hungarian pork industry, we investigate agglomeration effects for individual and corporate farms separately. Results indicate that pork production by these farm groups is affected by different factors in different ways. We distinguish two different ‘worlds’ within the Hungarian pork industry. The ‘introvert world’ of individual farms is very sensitive to agglomeration effects and spatial externalities. The ‘extrovert world’ of corporate farms is more resistant to agglomeration economies and spatial externalities.

Foreign direct investment and productivity spillovers: is China different?

ABSTRACTDrawing on a unique dataset from 41 studies on foreign direct investment productivity spillovers in China, our prime objective is to estimate spillover effects accounting for publication bias using meta-regression analysis. Robust to different specifications, we find that the publication bias-corrected horizontal/backward/forward spillover effects are consistently positive and economically significant. Interestingly, our findings show that China gains more horizontal and backward spillover effects than the average world.

In search of FDI horizontal spillovers in China: evidence from meta-analysis

This paper contributes to the literature on foreign direct investment (FDI) technology spillover effects, focusing on horizontal spillovers from foreign firms to their domestic competitors. Drawing on a unique dataset of 1018 estimates from 41 studies on FDI horizontal spillovers in China, our main objective is to quantitatively summarize reported estimates corrected for publication bias, and account for the heterogeneity in existing empirical results using meta-regression analysis. Robust to different specifications, we find that (1) the average horizontal spillover effect in China is positive and economically significant; (2) the horizontal spillover effects vary across subgroups of firms characterized by the nature of foreign-invested firms, origin of foreign-invested firms and ownership structure of domestic firms. The meta-regression analysis also uncovers the serious consequences of publication bias and reveals that the heterogeneity in research methods adopted by the profession to a large extent explains the diversity of the reported spillover estimates.

The Spillover Effects of Venture Capital

The age of National Strategy of Innovation-Driven Development provides new development opportunities for venture capital in China. Venture capital, as the important carrier of enterprise innovation, on the one hand, is the principle source of initial funds for start-up enterprises; on the other hand, it can alleviate enterprise moral hazards and the problem of agencies with its unique resources and value-added services. In recent years, scholars mainly focus on the study of the characteristics of venture capital institutions and their roles in invested enterprises, and the externality of venture capital has been ignored. Therefore, for China’s real economy, whether venture capital can contribute to positive spillover effects or not, venture capital plays the role through what channels, and is affected by which internal mechanism, all of these questions need to be researched and answered. Based on the condition that venture capital can effectively alleviate the enterprise agency problem, this paper links the mechanism of knowledge spillovers and the spillover effects of foreign direct investment, and summarizes four channels to the spillover effects of venture capital—the technology innovation, talent cultivation, scientific competitiveness and technological diffusion. According to these channels, we construct three spillover variables: horizontal, forward and backward spillovers, and make an empirical research on the spillover effects of venture capital with the data of Chinese listed companies from 2008 to 2015. What’s more, we try to explore the internal mechanism which restricts the venture capital spillover effects. The result of the empirical research shows that venture capital has significant vertical spillover effects under the three methods of estimation. It performs as that venture capital can promote the development of both upstream suppliers and downstream distributors, making higher total factor productivity. The paper fails to discover the horizontal spillover effects of venture capital. Further studying finds that the absorptive capacity of enterprises and the degree of the competition within industry play significant roles in the horizontal spillover. The technical threshold restricts intra-industry enterprises to absorb new knowledge, and then inhibits the horizontal spillover effects of venture capital. Moreover, intense competition may force companies with outdated technology in the same industry face elimination risks and also weaken the horizontal spillover of venture capital. It seems that the monopoly market structure is more conducive to knowledge spillovers, reflecting the MAR externalities. However, the competition is not the only one side. As Jacobs externalities theory says that intense competition optimizes the market structure and improves the cooperation, which is beneficial to the raise of vertical spillovers. The contributions may lie in the following three aspects: in terms of theory, the paper studies the venture capital spillover effects on the intra-industry and inter-industry, and offers a brand-new thought for the venture capital related research. In research methods, the paper uses three methods to estimate total factor productivity with the micro panel data, effectively alleviating the endogenous problem when estimating total factor productivity, and eliminating the interference of other invisible factors by combining the two-stage estimation method. In practice aspect, innovation entrepreneurship is the main melody of the present economic development in China, so venture capital plays an important role in encouraging innovation and stimulating entrepreneurship. Based on the analysis of channels of the venture capital spillover and the related affecting factors, this paper also finds three key factors of giving full play to the venture capital spillover effects—to promote enterprise innovation and cooperation, to maintain the vitality of the competitive market, and to ensure the healthy development of the talent market.

The origin of FDI and domestic firms’ productivity—Evidence from Vietnam

This study examines how the origin of foreign investors affects the degree of horizontal and vertical technological spillovers, using firm-level panel data from Vietnam in 2002–2011. The results show a positive association between the presence of Asian firms in downstream sectors and the productivity of Vietnamese firms in supply industries, but no significant relationship in the case of European and North American affiliates. Within Asia, we find that foreign direct investment from China and Taiwan generates positive vertical spillovers to local suppliers. We hypothesize that distance, preferential trade agreements, and institutional or technological differences that affect the degree of local sourcing significantly impact vertical spillovers from foreign direct investment. The horizontal spillover effects are in general negative and statistically significant. Various robustness checks are performed.

Spillovers between siblings and from offspring to parents are understudied: A review and future directions for research

BackgroundWhile a large literature has highlighted the protective effects of human capital on an individual's health and to some extent their offspring's health, little evidence is available on the positive spillover benefits of human capital for other family members. We conducted a scoping review of the evidence and identify future directions for research. MethodsWe systematically searched the public health and economics literature on spillover effects from human capital, as indicated by educational attainment, to the health and/or survival of family members. We assessed (i) downward spillover effects (from parents and/or grandparents to offspring), (ii) horizontal spillover effects (from partners, spouses, and/or siblings), and (iii) upward spillover effects (from offspring to their parents and/or grandparents). We assessed the frequency of studies, their study designs, findings, and identified priority areas to inform future research on spillover effects of human capital. FindingsA total of 567 studies met our selection criteria. 286 studies assessed downward spillovers, 22 studies assessed horizontal spillovers, and five studies assessed upward spillovers. Studies on horizontal and upward spillovers found universally positive associations between additional education and better health in family members. The majority of studies used cross-sectional and longitudinal study designs as opposed to (quasi-)experimental designs. Further research is needed on horizontal and upward spillovers and research in low-resource settings, in addition to understanding what level of education matters the most, as well as mechanisms. ConclusionsAlthough positive spillovers of human capital between siblings and from offspring to parents are likely, they have been understudied. Estimates of the returns to human capital that exclude these benefits may be too low.

The spillover effects of foreign direct investment on the firms’ productivity performances

The study aims to examine foreign direct investment spillover effects on the firms’ productivity performances and to examine the most important component of total factor productivity growth in explaining output growth. This study employs a time-varying stochastic frontier approach for firm level panel data of Indonesian manufacturing industry and performs a non-parametric test of the closeness of two distributions. The results demonstrate that foreign firms achieve higher productivity but less efficient than domestic firms. Increasing degrees of foreign ownership is negatively related to firms’ productivity but positively related to firms’ efficiency. There are positive horizontal spillover effects of foreign direct investment on the firms’ productivity and efficiency. The backward spillovers have positive impact on firm’s efficiency, and the forward spillovers have positive impact on firm’s productivity. However, there are negative backward spillover effects on firms’ productivity and negative forward spillover effects on firms’ efficiency. Besides that, within the same market technology spillover from FDI are smaller with higher level of labour quality. In the upstream market, the degree of absorptive capacity of suppliers has a negative impact on firms’ productivity but have a positive impact on reducing inefficiency. In the downstream markets, the greater ability of the buyers to identify, assimilate and exploit knowledge spillovers, the greater the impact on increasing productivity but the lesser the impact on reducing inefficiency. Finally, this study finds that all components of productivity; technological progress, technical efficiency change and scale efficiency change significantly contribute in explaining the TFP growth.

Foreign Direct Investment in the Western Balkans: What Role Has it Played During Transition?

The paper explores the impact of foreign direct investment (FDI) on the economies of the Western Balkans during their transition to a market system. The paper recalls the political and historical circumstances that have delayed transition in the Western Balkans economies, and draws attention to the specific features of FDI that have influenced their economic development. The main hypotheses are formulated and basic tests performed on data from the manufacturing sector. However, data limitations mean that we can only test for horizontal, rather than vertical, spillovers and in practice we are not able to identify many significant horizontal spillover effects. This finding can probably be explained by various factors – institutional, economic and political – that have constrained FDI effects in the Western Balkan economies in comparison with the Central East European countries. Our work has important policy implications; in order to accelerate economic development, Western Balkan policymakers may need to implement more effective economic policies.

FDI productivity spillovers and the technology gap in Malaysia's electrical and electronic industries

This study measures the impact of indirect technology transfer through spillovers from foreign direct investment (FDI) on Malaysia's development of a ‘high‐tech’ sector, namely the electrical and electronic (E&E) industries. We estimate the total factor productivity (TFP) of establishments as a function of foreign presence within and across industries. Both the fixed assets and wages share of foreign establishments in a five‐digit ISIC (International Standard Industrial Classification) industry are used as measures of foreign presence. The estimations provide evidence of significantly negative (or insignificant) FDI vertical spillover effects and insignificant horizontal spillover effects on the TFP of domestic establishments. The positive (negative) coefficient of the interaction term between the forward (horizontal) spillover variable and the technology gap supports the ‘catching‐up’ (technology accumulation) hypothesis. The negative impact, even absence, of FDI spillover effects on TFP and the mixed evidence on the effects of interactions between FDI spillovers and the technology gap suggest that fine‐tuning of fiscal incentive schemes for FDI to arrive at positive net benefits may prove to be a daunting task in the Malaysian E&E industries.

Assessing horizontal and Vertical Spillover Effects from Foreign Direct Investment in Russia

FDI is believed to be very helpful for the national economy’s development. It is expected to increase the profitability and productivity of domestic companies. The analysis of balance sheets of Russian enterprises shows that for the period2004-2012 foreign investment caused horizontal and vertical spillovers in economic sectors. But this impact is ambiguous. Econometric modeling establishes the significant positive role of backward spillover. This means that national suppliers gain benefits from international interaction and become more effective due to technological and knowledge inflow from abroad.

Research on Product Harm Crisis Attributes Influence on Horizontal Spillover Effect – The Moderating Effects of Product Similarity and Corporate Reputation

Product harm crisis will not only reduce the sales of defective products, may also form a spillover effect. The spillover effect is a frontier of product crisis harm. From the perspective of product harm crisis attribute, this paper studies the effect of product harm crisis attributes on horizontal spillover effects and differences, and explores the effect of corporate reputation in the process of horizontal spillover. Through the experimental study, the effects of product harm crisis attributes on horizontal spillover effects are explored. It is found that harmfulness, responsibility, no virtue significantly affect the horizontal spillover effects. Breach of contract and frequent on horizontal spillover effects did not affect.