Do Vertical Spillovers Differ by Investors' Productivity? Theory and Evidence from Vietnam

Bin Ni and Hayato Kato

MPRA Paper from University Library of Munich, Germany

Abstract: Developing countries are eager to host foreign direct investment to receive positive technology spillovers to their local firms. However, what types of foreign firms are desirable for the host country to achieve spillovers best? We address this question using firm-level panel data from Vietnam to investigate whether foreign Asian investors in downstream sectors with different productivity affects the productivity of local Vietnamese firms in upstream sectors differently. Using endogenous structural breaks, we divide Asian investors into low-, middle-, and high-productivity groups. The results suggest that the presence of the middle group has the strongest positive spillover effect. The differential spillover effects can be explained by a simple model with vertical linkages and productivity-enhancing investment by local suppliers. The theoretical mechanism is also empirically confirmed.

Keywords: FDI spillovers; Heterogeneous productivity; Firm-level data; Endogenous structural break; Vertical Cournot model (search for similar items in EconPapers)
JEL-codes: D22 F21 (search for similar items in EconPapers)
Date: 2020-03-27
New Economics Papers: this item is included in nep-eff, nep-int, nep-sbm, nep-sea, nep-tid and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Do vertical spillovers differ by investors’ productivity? Theory and evidence from Vietnam (2020)
Working Paper: Do vertical spillovers differ by investors' productivity?Theory and evidence from Vietnam (2020)
Working Paper: Do Vertical Spillovers Differ by Investors' Productivity? Theory and Evidence from Vietnam (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:99304

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