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FDI Horizontal and Vertical Effects on Local Firm Technical Efficiency

  • Chuc Dinh Nguyen

    ()

    (Aston Business School, Aston University, UK)

  • Gary Simpson

    (Aston Business School, Aston University, UK)

  • David Saal

    (Aston Business School, Aston University, UK)

  • Anh Ngoc Nguyen

    (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam)

  • Ngoc Quang Pham

    (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam)

Differencing from previous studies on foreign direct investment (FDI) spillovers to domestic enterprises which mainly focus on productivity, in this paper we take a different perspective by analysing the impacts of FDI to technical efficiency of domestic firms. The paper goes beyond the current literature to shed some light on the spillover effects of FDI to technical efficiency of small and medium enterprises in a developing country. By exploiting a firm-level panel dataset and using SFA models following Battese and Coelli (1995), the paper is able to analyse horizontal spillovers through imitation and competition and labour mobility as well as vertical spillovers through backward and forward linkages on technical efficiency. The paper contributes to the understanding of potential effects on foreign invested enterprises on domestic economy in general and local enterprises performance in particular. Thus it importantly assists policy making by the government of developing countries, where FDI is believed to create technical spillovers on domestic enterprises.

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Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 17.

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Length: 22 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:dpc:wpaper:1708
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