The role of relatedness and strategic linkages between domestic and MNE sectors in regional branching and resilience

Mattie Landman, Sanna Ojanperä, Stephen Kinsella () and Neave O’Clery ()
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Mattie Landman: University of Oxford
Sanna Ojanperä: University of Oxford
Neave O’Clery: University of Oxford

The Journal of Technology Transfer, 2023, vol. 48, issue 2, No 3, 515-559

Abstract: Abstract Despite the key role of multinational enterprises (MNEs) in both international markets and domestic economies, there is no consensus on their impact on their host economy. In particular, do MNEs stimulate new domestic firms through knowledge spillovers? Here, we look at the impact of MNEs on the entry and exit of domestic industries in Irish regions before, during, and after the 2008 Financial Crisis. Specifically, we are interested in whether the presence of MNEs in a region results in knowledge spillovers and the creation of new domestic industries in related sectors. To quantify how related an industry is to a region’s industry basket we propose two cohesion measures, weighted closeness and strategic closeness which capture direct linkages and dense inter-industry links between local industries respectively. We use a dataset of government-supported firms in Ireland (covering 90% of manufacturing and exporting) between 2006 and 2019. We find that domestic industries are both more likely to enter and less likely to leave a region if they are related to so-called ‘overlapping’ industries containing both domestic and MNE firms. In contrast, we find a negative impact on domestic entry and survival from cohesion to ‘exclusive MNE’ industries, suggesting that domestic firms are unable to ‘leap’ and thrive in MNE-proximate industries likely due to a technology or know-how gap. Finally, the type of cohesion matters. During the economic recovery (2015–2019), it is strategic rather than weighted closeness to overlapping industries that is associated with both domestic industry entry and survival.

Keywords: Industrial resilience; Industrial coherence; Multinational enterprises; Industrial diversity; Industry relatedness; Skill relatedness; Regional growth; Industrial transformation (search for similar items in EconPapers)
JEL-codes: O32 O33 O40 (search for similar items in EconPapers)
Date: 2023
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Working Paper: The role of relatedness and strategic linkages between domestic and MNE sectors in regional branching and resilience (2021)
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DOI: 10.1007/s10961-022-09930-4

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