Liquidity Constraints and Linkages with Multinationals

Beata Smarzynska Javorcik () and Mariana Spatareanu

No 7058, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using a unique data set from the Czech Republic for 1994-2003, this study examines the relationship between a firm’s liquidity constraints and its supply linkages with multinational corporations (MNCs). The empirical analysis indicates that Czech firms supplying MNCs are less credit constrained than non-suppliers. A closer inspection of the timing of the effect, however, suggests that this result is due to less constrained firms self-selecting into becoming MNC suppliers rather than the benefits derived from the supplying relationship. As recent literature finds that productivity spillovers from foreign direct investment (FDI) are most likely to take place through contacts between MNCs and their local suppliers, our finding suggests that well-developed financial markets may be needed in order to take full advantage of the benefits associated with FDI inflows.

Keywords: cash flow; FDI spillovers; foreign direct investment; liquidity constraints (search for similar items in EconPapers)
JEL-codes: F21 F23 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-tra
Date: 2008-11
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Working Paper: Liquidity Constraints and Linkages with Multinationals (2008)
Working Paper: Liquidity Constraints and Linkages with Multinationals (2008)
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