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Multinational Corporations and Productivity Convergence in Mexico

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  • Magnus Blomstrom
  • Edward N. Wolff

Abstract

This paper examines the impact of the operations of foreign-owned multinational firms on the productivity growth of Mexican manufacturing industries, 1965-1984. It investigates both the extent to which the penetration of a sector by foreign-owned firms affects the productivity of local firms in that sector and whether there is any evidence of convergence between that industry's productivity level and that of the United States. The main results can be summarized as follows: First, productivity levels of locally-owned firms in Mexico have converged to those of foreign-owned firms. Second, both the rate of productivity growth of local firms and their rate of catch-up to the multinationals are positively related to the degree of foreign ownership of an industry. Third, the productivity gap between Mexico and U.S. manufacturing has diminished between the mid-1960s and the mid-1980s. Fourth, the rate of productivity growth of Mexican industries and its rate of convergence to the United States are higher in industries with a greater presence of multinationals. We conclude that multinational firms have contributed to a geographical diffusion of technology and acted as a bridge between advanced and less advanced countries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3141.

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Date of creation: Oct 1989
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Publication status: published as William Baumol, Richard Nelson and Ed Wolff, eds., Convergence of Productivty: Cross-National Studies and Historical Evidence, Oxford University Press Oxford, 1994
Handle: RePEc:nbr:nberwo:3141

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  1. Baumol, William J & Wolff, Edward N, 1988. "Productivity Growth, Convergence, and Welfare: Reply," American Economic Review, American Economic Association, vol. 78(5), pages 1155-59, December.
  2. 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.
  3. Maddison, Angus & van Ark, Bart, 1989. "International Comparison of Purchasing Power, Real Output and Labour Productivity: A Case Study of Brazilian, Mexican and U.S. Manufacturing, 1975," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 35(1), pages 31-55, March.
  4. Steven Globerman, 1979. "Foreign Direct Investment and `Spillover' Efficiency Benefits in Canadian Manufacturing Industries," Canadian Journal of Economics, Canadian Economics Association, vol. 12(1), pages 42-56, February.
  5. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 385-406, June.
  6. Blomstrom, Magnus, 1986. "Foreign Investment and Productive Efficiency: The Case of Mexico," Journal of Industrial Economics, Wiley Blackwell, vol. 35(1), pages 97-110, September.
  7. Lall, Sanjaya, 1980. "Developing countries as exporters of industrial technology," Research Policy, Elsevier, vol. 9(1), pages 24-52, January.
  8. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-85, December.
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