FOREIGN DIRECT INVESTMENT, PRODUCTIVITY AND CROWDING-OUT: DYNAMIC PANEL EVIDENCE ON VIETNAMESE FIRMS

Hanh Pham ()
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Hanh Pham: University of Greenwich

No 3205904, Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences

Abstract: This paper investigates whether firms with foreign capital participation are more productive than domestically-owned firms in Vietnam; and whether the presence of firms with foreign capital has a crowding-out effect on domestically-owned firms. We utilize a rich dataset compiled by the Vietnamese General Statistical Office (GSO) from 2001?2010 and a dynamic panel data approach proposed by Arellano and Bond (1991) and Blundell and Bond (1998) to address the issue of endogeneity. We report that the share of foreign capital in firm equity has a positive and significant effect on productivity of foreign-owned firms in Vietnam. With respect to crowding-out effects, we identify opposing dynamics at work. On the one hand, we observe a firm-level crowding-out effect due to higher shares in turnover as the level of foreign capital increases. On the other hand, we observe an industry-level crowding-in effect as the share of both domestic and foreign-owned firms in turnover is higher when the industry-level of foreign capital intensity increases. Finally, we report that the crowding-in and crowding-out effects do not differ as the level of foreign capital share differs between firms and industries. The findings indicate that domestically-owned Vietnamese firms tend to lose market share to their foreign-owned competitors when they compete head to head; but they also tend to benefit from higher levels of foreign capital invested in their industry.

Keywords: dynamic panel; foreign direct investment; market-stealing effect; productivity; Vietnamese enterprises (search for similar items in EconPapers)
JEL-codes: A10 C13 D20 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2016-03
New Economics Papers: this item is included in nep-cse, nep-eff, nep-int and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Proceedings of the Proceedings of the 5th Economic & Finance Conference, Miami, Mar 2016, pages 351-377

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iefpro:3205904

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