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Foreign Direct Investment in Vietnam: Is There Any Evidence Of Technological Spillover Effects

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  • Anh Ngoc Nguyen

    () (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam)

  • Nguyen Thang

    (Center for Analysis and Forecasting (CAF), No1 Lieu Giai Street, Hanoi, Vietnam)

  • Le Dang Trung

    (Center for Analysis and Forecasting (CAF), No1 Lieu Giai Street, Hanoi, Vietnam)

  • Ngoc Quang Pham

    (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam)

  • Chuc Dinh Nguyen

    (Aston Business School, Aston University, UK)

  • Nhat Duc Nguyen

    (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam)

Abstract

In the context of integrating more deeply into the world economy the Vietnamese policy makers have undertaken several measures to attract foreign direct investment to the country, with the culmination of FDI inflows in 2007 reaching over USD 20 billion, an increase of 69% over 2006. The policy has been taken on the ground that the FDI inflows will create employment and bring along the much needed technological advances, which will spill over to domestic firms. In this paper, we use a firm-level panel data constructed from the Census 2000-2005 to investigate not only the horizontal spillovers but also the backward and forward linkages. Adding to the current literature which focused mainly on the spillovers in the manufacturing sector, our paper provide the first estimates of the spillover effects in the service sector (at least in the context of developing countries). We also distinguish between the horizontal output spillovers (which capture demonstration effects and competition effects) and the horizontal employment spillover (which captures the labour mobility effect). The results obtained from our regression models are mixed. Different channels of spillovers are at work for the manufacturing and the service sectors. We find evidence of the positive backward technological spillovers for the manufacturing and positive horizontal spillovers for the service sector.

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Bibliographic Info

Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 18.

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Length: 37 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:dpc:wpaper:1808

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Keywords: Foreign Direct Investment; Vietnam; technological spillovers;

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References

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  1. Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
  2. Tam B. Vu & Byron Gangnes & Ilan Noy, 2008. "Is Foreign Direct Investment Good for Growth? Evidence from Sectoral Analysis of China and Vietnam," Working Papers 200801, University of Hawaii at Manoa, Department of Economics.
  3. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
  4. Vernon, Raymond, 1979. "The Product Cycle Hypothesis in a New International Environment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 255-67, November.
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Cited by:
  1. Tomas Havranek & Zuzana Irsova, 2011. "How to Stir Up FDI Spillovers: Evidence from a Large Meta-Analysis," William Davidson Institute Working Papers Series wp1021, William Davidson Institute at the University of Michigan.
  2. Mustapha K. Nabli, 2011. "The Great Recession and Developing Countries : Economic Impact and Growth Prospects," World Bank Publications, The World Bank, number 2539.
  3. Iršová, Zuzana & Havránek, Tomáš, 2013. "Determinants of Horizontal Spillovers from FDI: Evidence from a Large Meta-Analysis," World Development, Elsevier, vol. 42(C), pages 1-15.
  4. Eric Ramstetter, 2009. "Firm- and Plant-level Analysis of Multinationals in Southeast Asia: the Perils of Pooling Industries and Balancing Panels," Global COE Hi-Stat Discussion Paper Series gd09-106, Institute of Economic Research, Hitotsubashi University.
  5. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers 404, WIFO.
  6. Jean-Raphael Chaponniere & Jean-Pierre Cling, 2009. "Vietnam's Export-Led Growth Model and Competition with China," Economie Internationale, CEPII research center, issue 118, pages 101-130.
  7. Sajid Anwar & Lan Nguyen, 2011. "Financial development and economic growth in Vietnam," Journal of Economics and Finance, Springer, vol. 35(3), pages 348-360, July.

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