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Creating backward linkages from multinationals: Is there a role for financial incentives?

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Author Info
Holger Görg
Aoife Hanley
Eric Strobl

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Abstract

We investigate whether government subsidies to local input manufacturers encourage procurement from foreign firms. We use a comprehensive panel data of Irish firms from 1983 until 2002. Our data shows a spontaneity about linkages and relative insensitivity to grant aid, although it may be the quality rather than quantity of linkages that matters. The longevity of a foreign firm’s stay is one consistent driver of linkages where foreign firms need time to find out about local suppliers. Our results hold even when controlling for the possible joint determination of grants and linkages and the boundedness of the linkage variable

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File URL: http://www.ifw-members.ifw-kiel.de/publications/services-outsourcing-and-innovation-an-empirical-investigation-2/kwp_1554
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Publisher Info
Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1554.

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Length: 27 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:kie:kieliw:1554

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Related research
Keywords: multinational enterprises; backward linkages; subsidies;

Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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  1. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September. [Downloadable!] (restricted)
  2. Gustavo J. Bobonis & Howard J. Shatz, 2007. "Agglomeration, Adjustment, and State Policies in the Location of Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 30-43, 01. [Downloadable!] (restricted)
  3. Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2006. "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," NBER Working Papers 12522, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  5. Rauch, James E. & Watson, Joel, 2003. "Starting small in an unfamiliar environment," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 1021-1042, September. [Downloadable!] (restricted)
    Other versions:
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