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Spatial Spillover Effects from Foreign Direct Investment in Vietnam

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  • Tran Toan Thang
  • Thi Song Hanh Pham
  • Bradley R. Barnes

Abstract

This paper investigates the role of inter-firm interaction and geographical proximity in the determination of productivity spillover effects from foreign to domestic firms. We developed an estimation approach using the Spatial Durbin model and applied this to a firm-level dataset from Vietnam from 2000–2005. We found that productivity spillovers diminished when the distance between foreign and domestic firms increases and that interactions among local firms amplify the spillovers. Within short distances, the presence of foreign firms creates positive backward, negative forward and horizontal spillovers. Based on the findings, several implications are extracted regarding promotion policy for foreign direct investment in developing countries.

Suggested Citation

  • Tran Toan Thang & Thi Song Hanh Pham & Bradley R. Barnes, 2016. "Spatial Spillover Effects from Foreign Direct Investment in Vietnam," Journal of Development Studies, Taylor & Francis Journals, vol. 52(10), pages 1431-1445, October.
    • Handle: RePEc:taf:jdevst:v:52:y:2016:i:10:p:1431-1445
    DOI: 10.1080/00220388.2016.1166205
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    9. Hien T. N. Huynh & Phuong V. Nguyen & Hoa D. X. Trieu & Khoa T. Tran, 2021. "Productivity Spillover from FDI to Domestic Firms across Six Regions in Vietnam," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(1), pages 59-75, January.
    10. Omar Abu Risha & Qingshi Wang & Mohammed Ismail Alhussam, 2023. "Impact of Foreign Enterprises’ Capital Inflow on Urbanization Factors: Evidence from Northeastern Cities of China," Sustainability, MDPI, vol. 15(21), pages 1-24, November.
    11. Md Akhtaruzzaman & Ramzi Benkraiem & Sabri Boubaker & Constantin Zopounidis, 2022. "COVID‐19 crisis and risk spillovers to developing economies: Evidence from Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(4), pages 898-918, May.
    12. Duong, Vu Hoang, 2020. "The threshold of absorptive capacity: The case of Vietnamese manufacturing firms," International Economics, Elsevier, vol. 163(C), pages 44-57.
    13. Heng Chen & Yan Zhang, 2022. "Regional Logistics Industry High-Quality Development Level Measurement, Dynamic Evolution, and Its Impact Path on Industrial Structure Optimization: Finding from China," Sustainability, MDPI, vol. 14(21), pages 1-21, October.
    14. Song, Young Chul & Son, Sung Hyun, 2020. "Identifying the impact of geographical proximity on spillover effect of FDI: The evidence from Indian local firms’ performance gains," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
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