Industrial Relatedness in MNE Spillovers over Geographical Space

Nicola Cortinovis, Zhiling Wang and Hengky Kurniawan ()

No 2111, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: In this paper, we explore how spillovers from multinational enterprises (MNEs) spread and impact domestic firms through different channels and at various spatial scales. Taking a firm-level approach, we test whether industrial relatedness mediates spillover effects from MNEs over and above horizontal and vertical linkages traditionally identified by the literature. Thanks to fine- grained geographical information, we further investigate the spatial reach of the spillovers and how they are associated with domestic firms’ characteristics such as absorptive capacity and technological sophistication. Our hypotheses are tested on a panel data set of Indonesian manufacturing firms census between 2002 to 2009. We find that domestic firms have higher total factor productivity when being exposed to a higher share of output from multinational firms in related industries, on top of the widely acknowledged horizontal and vertical MNE spillovers. We also show that MNE spillovers are sensitive to distance, with relatedness-mediated ones being detected between 30 and 60 km from the municipality of the MNE. Regarding heterogeneity, large firms benefit from productivity-enhancing relatedness spillovers at a wider spatial distance (up to 90km), and firms in less-advanced industries benefit from relatedness mediated effects as much as those in more advanced industries.

Keywords: Multinational enterprises; spillovers; industrial relatedness; spatial effects. (search for similar items in EconPapers)
JEL-codes: D24 F23 O33 R10 (search for similar items in EconPapers)
Date: 2021-03, Revised 2021-03
New Economics Papers: this item is included in nep-cse, nep-eff, nep-geo, nep-int, nep-sbm, nep-sea, nep-tid and nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:egu:wpaper:2111

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