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Suppliers of Multinationals and the Forced Linkage Effect: Evidence from Firm Level Data

  • Godart, Olivier


    (Kiel Institute for the World Economy)

  • Görg, Holger


    (Kiel Institute for the World Economy)

Using information on more than 1000 firms in a number of emerging countries, we find quantitative evidence that suppliers of multinationals that are pressured by their customers to reduce production costs or develop new products have higher productivity growth than other firms, including other host country suppliers of multinationals. These findings provide first empirical support for a "forced linkage effect" from supplying multinational companies. Our findings hold controlling for other factors within and outside the supplier-customer relationship and when endogeneity concerns are taken into consideration.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7173.

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Length: 33 pages
Date of creation: Jan 2013
Date of revision:
Publication status: published in: Journal of Economic Behavior and Organization, 2013, 94, 393-404
Handle: RePEc:iza:izadps:dp7173
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  1. Liu, Zhiqiang, 2008. "Foreign direct investment and technology spillovers: Theory and evidence," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 176-193, February.
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  12. Beata Smarzynska Javorcik & Wolfgang Keller & James R. Tybout, 2006. "Openness and Industrial Responses in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers," NBER Working Papers 12457, National Bureau of Economic Research, Inc.
  13. Gorodnichenko, Yuriy & Svejnar, Jan & Terrell, Katherine, 2007. "When Does FDI Have Positive Spillovers? Evidence from 17 Emerging Market Economies," IZA Discussion Papers 3079, Institute for the Study of Labor (IZA).
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  27. Daniel Kaufmann & Shang-Jin Wei, 2000. "Does 'Grease Money' Speed Up the Wheels of Commerce?," IMF Working Papers 00/64, International Monetary Fund.
  28. Harrison, Ann E. & Rodriguez-Clare, Andres, 2009. "Trade, Foreign Investment, and Industrial Policy," MPRA Paper 15561, University Library of Munich, Germany.
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