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Potential and actual FDI spillovers in global value chains : the role of foreign investor characteristics, absorptive capacity and transmission channels

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  • Winkler, Deborah

Abstract

Using newly collected survey data on direct supplier-multinational linkages in Chile, Ghana, Kenya, Lesotho, Mozambique, Swaziland, and Vietnam, this paper first evaluates whether foreign investors differ from domestic producers in terms of their potential to generate positive spillovers for local suppliers. It finds that foreign firms outperform domestic producers on several indicators, but have fewer linkages with the local economy and offer less supplier assistance, resulting in offsetting effects on the spillover potential. The paper also studies the relationship between foreign investor characteristics and linkages with the local economy as well as assistance extended to local suppliers. It finds that foreign investor characteristics matter for both. The paper also examines the role of suppliers'absorptive capacities in determining the intensity of their linkages with multinationals. The results indicate that several supplier characteristics matter, but these effects also depend on the length of the supplier relationship. Finally, the paper assesses whether assistance or requirements from a multinational influence spillovers on suppliers. The results confirm the existence of positive effects of assistance (including technical audits, joint product development, and technology licensing) on foreign direct investment spillovers, while the analysis finds no evidence of demand effects.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6424.

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Date of creation: 01 Apr 2013
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Handle: RePEc:wbk:wbrwps:6424

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Keywords: Microfinance; Foreign Direct Investment; Emerging Markets; Debt Markets; Markets and Market Access;

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