Productivity Gap and Vertical Spillover: Evidence from Vietnam

Bin Ni ()
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Bin Ni: Graduate School of Economics, Osaka University

No 16-04, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: Technology spillover induced by foreign direct investment has been proved to be an important channel to boost the productivity growth of local firms in the host country, especially in the context of developing economies. However, the empirical evidence remains inconsistent as to what extent the scale of spillover is affected by the productivity gap between foreign investors and local firms. This paper attempts to make clear such mechanism by applying Vietnamese firm-level data. Focusing on Asian investors, we show that the relationship between the productivity gap and vertical spillover takes an inverted-U shape. To be specific, we use stepwise chow test to decide on the cutoff value of total factor productivity (TFP) as the grouping criteria, and divide investors into low, middle and high-TFP groups. The results reveal that local suppliers in Vietnam can benefit the most from the Asian investors with middle-level TFP, whereas the benefits from the other two groups fade away. The finding is strongly robust even after we control the other spillover-influential factors such as firms' own effort to innovate, foreign firms' ownership, country and industry heterogeneity, and no matter whether we use stochastic frontier or Levinsohn & Petrin measurement of TFP. It thus provides novel evidence that investors with advanced technology do not necessarily diffuse their know-how to local partners. This implies it is important that both Vietnamese local firms and investors with superior technology work in the same direction to stimulate more corporations with each other.

Keywords: technology spillover; productivity gap; firm-level data; Vietnam (search for similar items in EconPapers)
JEL-codes: D22 F21 F64 Q56 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2016-03
New Economics Papers: this item is included in nep-eff, nep-pke, nep-sbm, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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