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Creating backward linkages from multinationals: Is there a role for financial incentives?

  • Holger Görg
  • Aoife Hanley
  • Eric Strobl

We investigate whether government subsidies to local input manufacturers encourage procurement from foreign firms. We use a comprehensive panel data of Irish firms from 1983 until 2002. Our data shows a spontaneity about linkages and relative insensitivity to grant aid, although it may be the quality rather than quantity of linkages that matters. The longevity of a foreign firm’s stay is one consistent driver of linkages where foreign firms need time to find out about local suppliers. Our results hold even when controlling for the possible joint determination of grants and linkages and the boundedness of the linkage variable

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File URL: https://www.ifw-members.ifw-kiel.de/publications/services-outsourcing-and-innovation-an-empirical-investigation-2/kwp_1554.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1554.

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Length: 27 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:kie:kieliw:1554
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  1. Areendam Chanda & Laura Alfaro & Sebnem Kalemli-Ozcan & Selin Sayek, . "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," Departmental Working Papers 2006-13, Department of Economics, Louisiana State University.
  2. Belderbos, Rene & Capannelli, Giovanni & Fukao, Kyoji, 2001. "Backward Vertical Linkages of Foreign Manufacturing Affiliates: Evidence from Japanese Multinationals," World Development, Elsevier, vol. 29(1), pages 189-208, January.
  3. James E. Rauch & Joel Watson, 1999. "Starting Small in an Unfamiliar Environment," Cowles Foundation Discussion Papers 1218, Cowles Foundation for Research in Economics, Yale University.
  4. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  5. Theodore H. Moran, 2001. "Parental Supervision: The New Paradigm for Foreign Direct Investment and Development," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa64, 03.
  6. Chung, Seungwha (Andy) & Kim, Gyeong Mook, 2003. "Performance effects of partnership between manufacturers and suppliers for new product development: the supplier's standpoint," Research Policy, Elsevier, vol. 32(4), pages 587-603, April.
  7. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
  8. Gustavo J. Bobonis & Howard J. Shatz, 2007. "Agglomeration, Adjustment, and State Policies in the Location of Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 30-43, February.
  9. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September.
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