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The benefits to domestically owned plants from inward direct investment: the role of vertical linkages

Author

Listed:
  • Alla Lileeva

Abstract

The paper estimates the effects of the U.S. direct investment in Canada upon productivity in domestically owned plants. We distinguish between FDI in the industry of domestically controlled plants and FDI in the industries linked through supply or use of intermediate inputs. We find that an increase in supplier FDI increases productivity growth in domestically controlled plants. The positive productivity effects of FDI are more pronounced for plants that buy more intermediates and who purchase science-based intermediate inputs (i.e., electronics, machinery and equipment, and chemicals). Productivity of domestic plants also benefits from larger-scale and higher rates of advanced technologies adoption.

Suggested Citation

  • Alla Lileeva, 2010. "The benefits to domestically owned plants from inward direct investment: the role of vertical linkages," Canadian Journal of Economics, Canadian Economics Association, vol. 43(2), pages 574-603, May.
  • Handle: RePEc:cje:issued:v:43:y:2010:i:2:p:574-603
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    Citations

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    Cited by:

    1. Chrysovalantou Milliou, 2014. "Location for Foreign Direct Investment in Vertically Related Markets," Review of International Economics, Wiley Blackwell, vol. 22(2), pages 326-341, May.
    2. Tomas Havranek & Zuzana Irsova, 2011. "How to Stir Up FDI Spillovers: Evidence from a Large Meta-Analysis," William Davidson Institute Working Papers Series wp1021, William Davidson Institute at the University of Michigan.
    3. Baldwin, John R. & Gu, Wulong, 2005. "Global Links: Multinationals, Foreign Ownership and Productivity Growth in Canadian Manufacturing," The Canadian Economy in Transition 2005009e, Statistics Canada, Economic Analysis Division.
    4. Sung Jin Kang, Hongshik Lee, Joonhyung Lee, 2013. "FDI Externalities and the Response of the Korean Stock Market," Korean Economic Review, Korean Economic Association, vol. 29, pages 119-137.
    5. Yanling Wang, 2010. "Exposure to FDI and New Plant Survival: Evidence in Canada," Carleton Economic Papers 10-05, Carleton University, Department of Economics.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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