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Exposure to FDI and New Plant Survival: Evidence in Canada

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Abstract

This paper examines how exposure to FDI affects Canadian indigenous plants‘ survival, through their economic linkages with FDI affiliates as competitors, input suppliers and customers. One unique feature of the paper is that it studies a country with extensive exposure to FDI, and relies on a dataset including hundreds of thousands of manufacturing plants born to Canadian domestic firms, covering a long time period from 1973 to 1997. The study finds that indigenous plants tend to have shorter lives (more deaths) due to competition with FDI affiliates operating in the same industry, but benefit from FDI affiliates operating in upstream and downstream industries as input suppliers and customers. The positive benefits of FDI outweigh the negative competition effects, resulting in net positive impact on the survival of indigenous Canadian-owned plants. For those plants in cohorts which have survived long enough to become exporters, access to foreign markets generates additional significant benefits for their survival.

Suggested Citation

  • Yanling Wang, 2010. "Exposure to FDI and New Plant Survival: Evidence in Canada," Carleton Economic Papers 10-05, Carleton University, Department of Economics.
  • Handle: RePEc:car:carecp:10-05
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    File URL: http://onlinelibrary.wiley.com/doi/10.1111/caje.12001/pdf
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    Cited by:

    1. Ari Kokko & Tran Toan Thang, 2014. "Foreign Direct Investment and the Survival of Domestic Private Firms in Viet Nam," Asian Development Review, MIT Press, vol. 31(1), pages 53-91, March.

    More about this item

    Keywords

    FDI; Survival; economic linkages;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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