Demand creation and competition effect of Export-platform FDI on backward linkages - Evidence from panel data analysis of Vietnamese supporting industries

Thanh Tam Nguyen-Huu and Nguyen Khac

No 13-02, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne

Abstract: The paper deals with the impacts of Export-platform FDI on backward linkages. First, in a three-country model, these impacts can be explained through competition effect and demand creation one. Whenever the former is stronger than the latter, the investment has a negative impact on backward linkages and conversely. Otherwise, if foreign and domestic producers are heterogeneous, then there is an optimal threshold for input intensity of technology used by foreign producers allowing a highest level of backward linkages. Secondly, in the case of the Vietnamese supporting industries between 2000 and 2007, we observe that Export-platform FDI generates a 100% crowding-out effect. Moreover, the correlation between production of these industries and input intensity of technology used by foreign producers is positive. This indicates that the greater this intensity is, the bigger benefit these supporting industries could get from Export-platform FDI.

Keywords: Export-platform FDI; multinational enterprises; backward linkages; competition effect; demand creation; supporting industries; Vietnam (search for similar items in EconPapers)
JEL-codes: F15 F23 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2013-02
New Economics Papers: this item is included in nep-sea
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