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Demand creation and competition effect of Export-platform FDI on backward linkages - Evidence from panel data analysis of Vietnamese supporting industries

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Abstract

The paper deals with the impacts of Export-platform FDI on backward linkages. First, in a three-country model, these impacts can be explained through competition effect and demand creation one. Whenever the former is stronger than the latter, the investment has a negative impact on backward linkages and conversely. Otherwise, if foreign and domestic producers are heterogeneous, then there is an optimal threshold for input intensity of technology used by foreign producers allowing a highest level of backward linkages. Secondly, in the case of the Vietnamese supporting industries between 2000 and 2007, we observe that Export-platform FDI generates a 100% crowding-out effect. Moreover, the correlation between production of these industries and input intensity of technology used by foreign producers is positive. This indicates that the greater this intensity is, the bigger benefit these supporting industries could get from Export-platform FDI.

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File URL: http://epee.univ-evry.fr/RePEc/2013/13-02.pdf
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Paper provided by Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne in its series Documents de recherche with number 13-02.

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Length: 45 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:eve:wpaper:13-02

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Keywords: Export-platform FDI; multinational enterprises; backward linkages; competition effect; demand creation; supporting industries; Vietnam;

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