Spillovers through backward linkages from multinationals: Measurement matters!

Eric Strobl (), Salvador Barrios () and Görg, Holger
Authors registered in the RePEc Author Service: Holger Görg

No 7491, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We argue that the measures of backward linkages used in recent papers on spillovers from multinational companies are potentially problematic, as they depend on a number of restrictive assumptions, namely that (i) multinationals use domestically produced inputs in the same proportion as imported inputs, (ii) multinationals have the same input sourcing behaviour as domestic firms, irrespective of their country of origin, and (iii) the demand for locally produced inputs by multinationals is proportional to their share of locally produced output. We discuss why these assumptions are likely to be violated in practice, and provide alternative measures that overcome these drawbacks. Our results, using plant level data for Ireland, show clearly that the choice of backward linkage measure and thus, the assumptions behind them, matters greatly in order to draw possible conclusions regarding the existence of FDI-related spillovers. Using the standard measure employed in the literature we fail to find robust evidence for spillovers through backward linkages. However, when we use alternative measures of backward linkages that relax assumptions (i)-(iii), we find robust evidence for positive FDI backward spillover effects.

Keywords: Backward spillovers; Multinationals; Productivity spillovers (search for similar items in EconPapers)
JEL-codes: F23 L22 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://cepr.org/publications/DP7491 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Chapter: Spillovers through backward linkages from multinationals: Measurement matters! (2016)
Journal Article: Spillovers through backward linkages from multinationals: Measurement matters! (2011)
Working Paper: Spillovers Through Backward Linkages from Multinationals: Measurement Matters! (2009)
Working Paper: Spillovers through backward linkages from multinationals: measurement matters! (2009)
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:cpr:ceprdp:7491

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP7491

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().