Upgrading of Foreign Affiliates in Sub‐Saharan Africa and Spillovers to Local Firms

Using unusually rich information for foreign affiliates in goods‐producing and goods‐selling industries of 19 countries in Sub‐Saharan Africa in 2009, we provide novel evidence on positive associations of the importance of parent‐to‐affiliate transfers of different types of tacit knowledge (e.g., technology and know‐how) with parent‐to‐affiliate transfers of inputs and capital goods. Similarly, we provide novel evidence on positive associations of parent‐to‐affiliate knowledge and input transfers with affiliate assistance to their host‐country suppliers in key areas (technology and know‐how, product quality upgrading). These findings suggest that parent companies leverage their organisational capital, including through transfers of knowledge, inputs and capital goods to their foreign affiliates, which, in turn, assist their host‐country suppliers to upgrade, so that multinational firms achieve effective and efficient coordination and production. Taking advantage of variation in the technological intensity of affiliate industries strengthens the main results and interpretation, but also reveals a few important nuances in these.