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Spillovers through backward linkages from multinationals: Measurement matters!

In: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT

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  • Salvador Barrios
  • Holger Görg
  • Eric Strobl

Abstract

We argue that the measures of backward linkages wed in recent pages on spillovers from multinational companies are potentially problematic. as they depend on a number of restrictive assumptions. namely that (i) multinationals use domestically produced inputs in the same proportion as Imported Inputs, (ii) multinationals have the same input sourcing behaviour as domestic firms, Irrespective of their country of origin, and (iii) the demand for locally produced Inputs by multinationals is proportional to their share of locally produced output. We discuss why these assumptions are likely to be violated in practice, and provide alternative measures that overcome these drawbacks. Our results. using plant level data for Ireland, clearly show that the choice of backward linkage measure and thus. the assumptions behind it. matters greatly In order to draw possible conclusions regarding the existence of foreign direct investment (FDI)-related spillovers. Using the standard measure employed In the literature we fail to find robust evidence for spillovers through backward linkages. However, when we use alternative measures of backward linkages that relax assumptions (i)–(iii), we find robust evidence for positive FDI backward spillover effects.

Suggested Citation

  • Salvador Barrios & Holger Görg & Eric Strobl, 2016. "Spillovers through backward linkages from multinationals: Measurement matters!," World Scientific Book Chapters,in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT, chapter 11, pages 213-226 World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789814749237_0011
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    More about this item

    Keywords

    Multinational Enterprises; Foreign Direct Investment; Spillovers; Development; Host Country;

    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • F0 - International Economics - - General
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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