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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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File URL: http://ftp.iza.org/dp7173.pdf
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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. Grossman, Gene M. & Helpman, Elhanan, 2004. "Managerial incentives and the international organization of production," Journal of International Economics, Elsevier, vol. 63(2), pages 237-262, July.
  2. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-77, July.
  3. Kaufmann, Daniel & Wei, Shang-Jin, 1999. "Does 'Grease Money' Speed Up the Wheels of Commerce?," MPRA Paper 8209, University Library of Munich, Germany.
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  8. Harrison, Ann & Rodríguez-Clare, Andrés, 2010. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," Handbook of Development Economics, Elsevier.
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  10. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
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  12. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September.
  13. Havranek, Tomas & Irsova, Zuzana, 2011. "Estimating vertical spillovers from FDI: Why results vary and what the true effect is," Journal of International Economics, Elsevier, vol. 85(2), pages 234-244.
  14. Yuriy Gorodnichenko & Jan Svejnar & Katherine Terrell, 2008. "Globalization and Innovation in Emerging Markets," Working Papers 583, Research Seminar in International Economics, University of Michigan.
  15. Barrios, Salvador & Görg, Holger & Strobl, Eric, 2009. "Spillovers Through Backward Linkages from Multinationals: Measurement Matters!," IZA Discussion Papers 4477, Institute for the Study of Labor (IZA).
  16. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
  17. Theodore H. Moran, 2001. "Parental Supervision: The New Paradigm for Foreign Direct Investment and Development," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa64, May.
  18. 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).
  19. Stephen R. Yeaple & Wolfgang Keller, 2003. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence From the United States," IMF Working Papers 03/248, International Monetary Fund.
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  27. repec:hrv:faseco:4784029 is not listed on IDEAS
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  29. Beata S. Javorcik & Mariana Spatareanu, 2009. "Tough Love: Do Czech Suppliers Learn from their Relationships with Multinationals?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 811-833, December.
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