Multinationals and Linkages: An Empirical Investigation

Laura Alfaro and Andres Rodriguez-Clare

Economía Journal, 2004, vol. Volume 4 Number 2, issue Spring 2004, 113-169

Abstract: Several recent papers have used plant-level data and panel econometric techniques to carefully explore the existence FDI externalities. One conclusion that emerges from this literature is that it is difficult to find evidence of positive externalities from multinationals to local firms in the same sector (horizontal externalities). In fact, many studies find evidence of negative horizontal externalities arising from multinational activity while confirming the existence of positive externalities from multinationals to local firms in upstream industries (vertical externalities). In this paper we explore the channels through which these positive and negative externalities may be materializing, focusing on the role of backward linkages. In particular, we criticize the common usage of the domestic sourcing coefficient as an indicator of a firm?s linkage potential and propose an alternative, theoretically derived indicator. We then use plant-level data from several Latin American countries to compare multinationals? linkage potential to that of domestic firms. We find that multinational?s linkage potential in Brazil, Chile and Venezuela is higher than for domestic firms. For Mexico, we cannot reject the hypothesis that foreign and local firms have similar linkage potential. Finally, we discuss the relationship between this finding and the conclusions that emerge from the recent empirical literature.

Keywords: Foreign Direct Investment; Multinational Firms; Linkages; Spillovers; Economic Development. (search for similar items in EconPapers)
JEL-codes: F23 O19 O24 (search for similar items in EconPapers)
Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (86)

Downloads: (external link)
http://economia.lacea.org/contents.htm

Related works:
Working Paper: Multinationals and Linkages: An Empirical Investigation (2004)
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:col:000425:008673

Access Statistics for this article

More articles in Economía Journal from The Latin American and Caribbean Economic Association - LACEA Contact information at EDIRC.
Bibliographic data for series maintained by LACEA ().