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Multinationals, Technological Incompatibilities, and Spillovers

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  • Carluccio, Juan
  • Fally, Thibault

Abstract

Empirical studies provide evidence of positive spillovers from multinational firms to upstream suppliers coupled with negative spillovers to firms in the same industry. This paper shows that these empirical regularities can be rationalized in a model with incompatibilities between foreign and domestic technologies. When foreign technologies require specialized inputs, some local suppliers self-select into production for multinational firms. This ”technological segmentation” in the upstream industry magnifies the productivity advantage of multinationals by restricting backward and forward linkages to groups of firms using the same technology. In this setting, we study the role of heterogeneity among domestic firms. We show that only the best suppliers adopt the foreign technology and cater to multinationals. In the long run, technology adoption by the most productive downstream firms creates complementarities with multinationals that can offset the negative impact of segmentation.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7869.

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Date of creation: Jun 2010
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Handle: RePEc:cpr:ceprdp:7869

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Keywords: externalities; multinational firms; technological incompatibilities;

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  1. K. Schoors & B. Van Der Tol, 2002. "Foreign direct investment spillovers within and between sectors: Evidence from Hungarian data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 02/157, Ghent University, Faculty of Economics and Business Administration.
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  4. Antras, Pol, 2005. "Incomplete Contracts and the Product Cycle," Scholarly Articles 3196324, Harvard University Department of Economics.
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  7. Antras, Pol & Helpman, Elhanan, 2004. "Global Sourcing," Scholarly Articles 3196327, Harvard University Department of Economics.
  8. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
  9. Andrés Rodríguez-Clare, 2005. "Coordination Failures, Clusters and Microeconomic Interventions," IDB Publications 6829, Inter-American Development Bank.
  10. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
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  12. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  13. Holger Gorg & Frances Ruane, 2001. "Multinational Companies and Linkages: Panel-Data Evidence for the Irish Electronics Sector," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(1), pages 1-18.
  14. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
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Citations

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Cited by:
  1. Carluccio, Juan & Fally, Thibault, 2013. "Foreign entry and spillovers with technological incompatibilities in the supply chain," Journal of International Economics, Elsevier, vol. 90(1), pages 123-135.
  2. Juan Carluccio & Thibault Fally, 2008. "Global sourcing under imperfect capital markets," Working Papers halshs-00586005, HAL.
  3. Carluccio, Juan & Fally, Thibault, 2010. "Global Sourcing under Imperfect Capital Markets," CEPR Discussion Papers 7868, C.E.P.R. Discussion Papers.
  4. Hodaka Morita & Xuan Nguyen, 2012. "FDI and Technology Spillovers under Vertical Product Di erentiation," Discussion Papers 2012-19, School of Economics, The University of New South Wales.

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