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Technology transfers, foreign investment and productivity spillovers: evidence from Vietnam

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Author Info

  • Carol Newman

    ()
    (Institute for International Integration Studies, Trinity College Dublin and Department of Economics, Trinity College Dublin)

  • John Rand

    ()
    (Department of Food and Resource Economics, University of Copenhagen)

  • Theodore Talbot

    ()
    (Department of Economics, University of Copenhagen)

  • Finn Tarp

    ()
    (UNU-WIDER, Helsinki and Department of Economics, University of Copenhagen)

Abstract

This paper provides new evidence on the relationship between foreign direct investment (FDI) and the productivity of domestic firms. Using a specially designed survey on a sample of over 7,500 manufacturing firms in Vietnam we uncover some of the mechanisms that explain productivity spillovers from FDI through vertical linkages along the supply chain. Our results suggest that domestic firms experience more productivity spillovers through forward linkages from foreign-input suppliers to domestic input users than through backward linkages from foreign customers to domestic producers of inputs. Productivity externalities from upstream sectors are associated with joint venture foreign investors while downstream sectors experience direct technology transfers from upstream wholly foreign owned investors. Spillovers from FDI through backward linkages are also detected but only when competition from imported intermediates is controlled for and are associated with innovations and technology investments made by firms.

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Bibliographic Info

Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp440.

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Length: 26 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:iis:dispap:iiisdp440

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Keywords: Foreign direct investment; productivity spillovers; technology transfers; absorptive capacity; Vietnam;

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References

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  1. Maurice Kugler, 2006. "Spillovers From Foreign Direct Investment:Within Or Between Industries?," BORRADORES DE ECONOMIA 003523, BANCO DE LA REPÚBLICA.
  2. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
  3. Beata K. Smarzynska, 2003. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages," William Davidson Institute Working Papers Series 548, William Davidson Institute at the University of Michigan.
  4. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
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  7. Antonello Zanfei, 2012. "Effects, Not Externalities," The European Journal of Development Research, Palgrave Macmillan, vol. 24(1), pages 8-14, February.
  8. Carol Newman & John Rand & Finn Tarp, 2013. "Industry Switching in Developing Countries," World Bank Economic Review, World Bank Group, vol. 27(2), pages 357-388.
  9. Barrios, Salvador & Görg, Holger & Strobl, Eric, 2009. "Spillovers through backward linkages from multinationals: Measurement matters!," CEPR Discussion Papers 7491, C.E.P.R. Discussion Papers.
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  12. Girma, Sourafel & Görg, Holger & Pisu, Mauro, 2008. "Exporting, linkages and productivity spillovers from foreign direct investment," Open Access Publications from Kiel Institute for the World Economy 4265, Kiel Institute for the World Economy (IfW).
  13. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
  14. Blomstrom, Magnus & Sjoholm, Fredrik, 1999. "Technology transfer and spillovers: Does local participation with multinationals matter?1," European Economic Review, Elsevier, vol. 43(4-6), pages 915-923, April.
  15. Roger Smeets, 2008. "Collecting the Pieces of the FDI Knowledge Spillovers Puzzle," World Bank Research Observer, World Bank Group, vol. 23(2), pages 107-138, March.
  16. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September.
  17. 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.
  18. Giroud, Axèle & Jindra, Björn & Marek, Philipp, 2012. "Heterogeneous FDI in Transition Economies – A Novel Approach to Assess the Developmental Impact of Backward Linkages," World Development, Elsevier, vol. 40(11), pages 2206-2220.
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