Multinational Corporation Affiliates, Backward Linkages, and Productivity Spillovers in Developing and Emerging Economies: Evidence and Policy Making

Jacob Jordaan, Willem Douw and Zhenwei Qiang

No 9364, Policy Research Working Paper Series from The World Bank

Abstract: Recent research on productivity spillovers from affiliates of multinational corporations in developing and emerging economies finds that backward linkages from affiliates of foreign-owned firms to local suppliers constitute the main channel transmitting productivity spillovers. This finding has important policy implications, given that host economy governments often spend considerable resources on attracting multinational corporation investments and promoting their impact on technological development and economic growth. This paper conducts a new and comprehensive survey of recent empirical studies that focus on the drivers and impacts of backward linkages between multinational corporation affiliates and their local suppliers. The literature survey reveals that several characteristics of multinational corporation affiliates and domestic firms, host economy conditions, and various mediating factors influence the level of use of local suppliers, the nature and degree of technology dissemination, and the materialization of productivity spillovers among domestic firms. These findings are used to identify the main areas where policy making can be effective. The paper discusses various types of soft or light-handed industrial policies that host economy governments can design and implement to foster the extent of linkages between multinational corporations and local suppliers, facilitate technology dissemination, and enhance productivity spillovers among domestic firms.

Keywords: International Trade and Trade Rules; Macroeconomic Management; Economic Forecasting; Governance Diagnostic Capacity Building; Macroeconomics and Economic Growth; Economic Policy; Institutions and Governance; Access to Finance (search for similar items in EconPapers)
Date: 2020-08-24
New Economics Papers: this item is included in nep-afr, nep-cse, nep-dev, nep-int, nep-mac and nep-sbm
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Citations: View citations in EconPapers (3)

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