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Impacts of FDI Linkages on the Labor Productivity of Domestic Firms: The Role of Local Business Environment

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  • Nam Hoang Vu
  • Bich Ngoc Thi Le
  • Thanh Le

Abstract

This study contributes to the literature on the spillovers of foreign direct investment by presenting empirical evidence on the impact of linkages with foreign-invested firms on the productivity of domestic firms in different local business environments. Using longitudinal data in a transitional economy of Vietnam from 2012 to 2018 and applying different estimation techniques to deal with the potential endogeneity problem, the study shows that linkages with foreign-invested firms have a positive impact on the labor productivity of domestic firms. This relationship is significantly enhanced in an improved local business environment. Additionally, this enhancement effect is observed among firms with a smaller size and those operating in medium- and high-technology industries. The findings suggest important implications to support businesses through improving the local business environment in transition economies.

Suggested Citation

  • Nam Hoang Vu & Bich Ngoc Thi Le & Thanh Le, 2025. "Impacts of FDI Linkages on the Labor Productivity of Domestic Firms: The Role of Local Business Environment," SAGE Open, , vol. 15(3), pages 21582440251, August.
    • Handle: RePEc:sae:sagope:v:15:y:2025:i:3:p:21582440251362392
    DOI: 10.1177/21582440251362392
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