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Trade and Value Chain Participation: Domestic Firms and FDI Spillovers in Africa

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  • Hoekman, Bernard
  • Sanfilippo, Marco

Abstract

Data on the location of foreign direct investment (FDI) projects within and across African nations are combined with firm-level survey data and information on sectoral input-output relationships to assess what types of FDI are more likely to influence participation in global value chains (GVCs), and to investigate the relationship between FDI and the performance of proximate domestic firms. Firm-level analysis finds evidence of vertical spillovers from exposure to FDI, mainly in the manufacturing sector domestic firms located near FDI projects that offer potential supply or demand linkages are more likely to engage in trade through imports or exports. Proximity to FDI projects in the same sector (horizontal linkage) is less likely to affect trade or GVC performance of domestic firms. Both vertical and horizontal FDI linkages are associated with higher labour productivity and other dimensions of performance.

Suggested Citation

  • Hoekman, Bernard & Sanfilippo, Marco, 2022. "Trade and Value Chain Participation: Domestic Firms and FDI Spillovers in Africa," Working Papers cdb6a1ef-27e6-4ccc-bcd8-c, African Economic Research Consortium.
    • Handle: RePEc:aer:wpaper:cdb6a1ef-27e6-4ccc-bcd8-ce2238973940
    Note: African Economic Research Consortium
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    2. Xiaomei Li & Radziah Adam, 2025. "Promoting Sustainable Manufacturing Growth Through Foreign Direct Investment and Foreign Trade: Evidence from China’s 28 Sub-Industries," Sustainability, MDPI, vol. 17(20), pages 1-21, October.
    3. Tabea Lakemann & Jann Lay & Regina Schnars & Tevin Tafese, 2025. "Greenfield FDI and job creation in Africa," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 161(1), pages 413-440, February.
    4. Mbena Jacques Yana, 2024. "FDI and their participation in global value chains: An analysis based on East Asia," Economic and Regional Studies / Studia Ekonomiczne i Regionalne, Sciendo, vol. 17(3), pages 408-432.
    5. Xiangmin He & Jianhua Zhou, 2025. "Front-End Environment Regulation, Heterogeneous FDI Spillover, and the Firm’s Green Global Value Chains Upgrading," SAGE Open, , vol. 15(3), pages 21582440251, August.
    6. Hisamitsu Saito & Toshiyuki Matsuura, 2025. "Foreign Direct Investment and Quality‐Upgrading Spillovers in Indonesia," The World Economy, Wiley Blackwell, vol. 48(5), pages 1127-1138, May.
    7. Chetia, Pompi & Behera, Smruti Ranjan & Mishra, Tapas & Parhi, Mamta, 2025. "FDI spillovers, innovation and the role of industrial clusters: Evidence from innovative Indian manufacturing firms," Economic Modelling, Elsevier, vol. 152(C).

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