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Local intermediate inputs and the shared supplier spillovers of foreign direct investment

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  • Kee, Hiau Looi

Abstract

Trade liberalizations have been shown to improve domestic firms' performance through the new varieties of imported intermediate inputs. This paper uses a unique, representative sample of Bangladeshi garment firms to highlight that local intermediate inputs may also enhance domestic firms' performance, through the shared supplier spillovers of foreign direct investment (FDI) firms. An exogenous EU trade policy shock is shown to cause some FDI firms in Bangladesh to expand, which led to better performance of the domestic firms that shared their suppliers. Overall, the shared supplier spillovers of FDI explain 1/4 of the product scope expansion and 1/3 of the productivity gains within domestic firms.

Suggested Citation

  • Kee, Hiau Looi, 2015. "Local intermediate inputs and the shared supplier spillovers of foreign direct investment," Journal of Development Economics, Elsevier, vol. 112(C), pages 56-71.
  • Handle: RePEc:eee:deveco:v:112:y:2015:i:c:p:56-71
    DOI: 10.1016/j.jdeveco.2014.09.007
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    Cited by:

    1. Sharif M. Hossain & Nobuhiro Hosoe, 2017. "Foreign Direct Investment in the Ready-Made Garments Sector of Bangladesh : Macro and Distributional Implications," GRIPS Discussion Papers 17-10, National Graduate Institute for Policy Studies.
    2. Yoshimichi Murakami & Keijiro Otsuka, 2017. "A Review of the Literature on Productivity Impacts of Global Value Chains and Foreign Direct Investment: Towards an Integrated Approach," Discussion Paper Series DP2017-19, Research Institute for Economics & Business Administration, Kobe University.
    3. World Bank Group, 2017. "Investment Policy and Promotion Diagnostics and Tools," World Bank Other Operational Studies 28281, The World Bank.
    4. Chiacchio, Francesco & Gradeva, Katerina & Lopez-Garcia, Paloma, 2018. "The post-crisis TFP growth slowdown in CEE countries: exploring the role of Global Value Chains," Working Paper Series 2143, European Central Bank.

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