The effect of FDI on local suppliers: Evidence from Audi in Hungary

Marta Bisztray

No 1622, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: In 1993 Audi opened a new plant in Hungary. This paper examines the long-term effects of this large foreign direct investment on local firms operating in supplier industries. I use firm-level panel data with long time series. Using the method of triple difference-in-differences I compare outcomes of firms in supplier and control industries, close and far from the Audi plant, before and after the entry. My main findings are: (1) after the Audi entry the average annual growth rate of local firms increased by 3 percentage points for sales and 2 percentage points for employment. The effect is visible only five years after the entry of Audi. I find no positive effect on productivity. (2) Firms with foreign owners account for all the positive effect on sales and employment, suggesting a foreign-to-foreign complementarity in investments. Firms with higher productivity gained more. Consequently, the low initial productivity of domestic firms may explain the lack of an effect in this group. (3) New entrants in the supplier industry locating close to Audi are larger and grow faster, suggesting that Audi also had an effect on the extensive margin.

Keywords: foreign direct investment; vertical spillovers; agglomeration (search for similar items in EconPapers)
JEL-codes: F23 R12 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2016-06
New Economics Papers: this item is included in nep-geo, nep-int, nep-sbm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://econ.core.hu/file/download/mtdp/MTDP1622.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to econ.core.hu:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:has:discpr:1622

Access Statistics for this paper

More papers in CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies Contact information at EDIRC.
Bibliographic data for series maintained by Nora Horvath ( this e-mail address is bad, please contact ).