Impact Of Foreign Presence Research Articles

Supply chain fragmentation, input–output tables and spillovers from foreign direct investment

ABSTRACTThe literature on the impact of multinationals on domestic firms' productivity points to supply chain linkages with multinational firms as the main channel for positive spillover effects. Local and multinational firms' relative positions in the supply chain are typically determined through the use of input–output tables. For a panel of Romanian firms, we show that the level of industry aggregation in these tables and the applied spillover definitions bear an important impact on estimated spillover effects. We find that the total impact of foreign presence – irrespective of the channel – is considerably larger when detailed IO-tables are used. When more aggregated tables are used, one is likely to misclassify a considerable number of supplier–client activity as within-industry competitive activity. Including within-industry supply and use in the measures of supplier–client activity results in a further increase of the spillover effect on local suppliers, whereas the within-industry spillover effect disappears.

Can the presence of foreign investment affect the capital structure of domestic firms?

Using a simple theoretical model, this paper argues that an increase in foreign presence, which refers to the level of foreign investment in a given domestic firm, can affect the leverage of domestic firms. We apply the model to explore the link between foreign presence and leverage with firm level panel data from China. The empirical estimation, using instrumental variable Tobit regression, reveals that, in overall terms, the impact of foreign presence on the leverage of domestic firms in China's manufacturing sector is negative. We find that the negative impact on the leverage of privately owned firms is large relative to state-owned firms. Furthermore, we find that the impact of foreign presence on leverage varies from industry to industry, which is consistent with the presence of heterogeneity in the productivity spillover effect.

Presence of Foreign Firms and the Capital Structure of Domestic Firms: Evidence from Chinaas Manufacturing Sector?

Using a simple theoretical model, where presence of foreign firms leads to a positive externality to domestic firms, this paper argues that an increase in foreign presence increases the debt of domestic firms and its impact on firm investment is also positive. As foreign presence increases both debt and investment, its impact on firm leverage cannot be unambiguously determined. We explore the link between foreign presence and firm leverage by using firm level panel data from China. The empirical estimation based on the Instrumental Variable Tobit regression reveals that, in overall terms, the impact of foreign presence on the leverage of domestic firms in China's manufacturing sector is negative. We find that the negative impact on the leverage of privately owned firms is relatively large. Furthermore, the impact of foreign presence on the leverage of domestic firms varies from industry to industry.