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Liquidity Constraints and Firms' Linkages with Multinationals


  • Beata S. Javorcik
  • Mariana Spatareanu


Using a unique data set on the Czech Republic for 1994--2003, this article examines the relationship between a firm's liquidity constraints and its supply linkages with multinational corporations (MNCs). The empirical analysis indicates that Czech firms supplying multinationals are less credit constrained than are nonsuppliers. Closer inspection of the timing of the effect, however, suggests that the result is due to self-selection of less constrained firms into supplying multinationals rather than to the benefits derived from the supplying relationship. As the recent literature finds that productivity spillovers from foreign direct investment (FDI) are most likely to take place through contacts between MNCs and their local suppliers, this finding suggests that well-developed financial markets may be needed to take full advantage of the benefits associated with FDI inflows. Copyright The Author 2009. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank . All rights reserved. For permissions, please e-mail:, Oxford University Press.

Suggested Citation

  • Beata S. Javorcik & Mariana Spatareanu, 2009. "Liquidity Constraints and Firms' Linkages with Multinationals," World Bank Economic Review, World Bank Group, vol. 23(2), pages 323-346, June.
  • Handle: RePEc:oup:wbecrv:v:23:y:2009:i:2:p:323-346

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    References listed on IDEAS

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    Cited by:

    1. Florian MAYNERIS, 2011. "A new perspective on the firm size-growth relationship: Shape of profits, investment and heterogeneous credit constraints," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011044, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Manova, Kalina & Yu, Zhihong, 2016. "How firms export: Processing vs. ordinary trade with financial frictions," Journal of International Economics, Elsevier, vol. 100(C), pages 120-137.
    3. Havranek, Tomas & Irsova, Zuzana, 2011. "Estimating vertical spillovers from FDI: Why results vary and what the true effect is," Journal of International Economics, Elsevier, vol. 85(2), pages 234-244.
    4. Agarwal, Natasha & Milner, Chris & Riaño, Alejandro, 2014. "Credit constraints and spillovers from foreign firms in China," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 261-275.
    5. Holger Görg & Erasmus Kersting, 2017. "Vertical integration and supplier finance," Canadian Journal of Economics, Canadian Economics Association, vol. 50(1), pages 273-305, February.
    6. Beata S. Javorcik & Mariana Spatareanu, 2009. "Tough Love: Do Czech Suppliers Learn from their Relationships with Multinationals?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 811-833, December.
    7. Steven Poelhekke, 2016. "Financial globalization and foreign direct investment," DNB Working Papers 527, Netherlands Central Bank, Research Department.

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