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Suppliers of multinationals and the forced linkage effect: Evidence from firm level data

Olivier N. Godart and Holger Görg

No 1822, Kiel Working Papers from Kiel Institute for the World Economy (IfW)

Abstract: Using information on more than 1000 firms in a number of emerging countries, we find quantitative evidence that suppliers of multinationals that are pressured by their customers to reduce production costs or develop new products have higher productivity growth than other firms, including other host country suppliers of multinationals. These findings provide first empirical support for a 'forced linkage effect' from supplying multinational companies. Our findings hold controlling for other factors within and outside the supplier- customer relationship and when endogeneity concerns are taken into consideration.

Keywords: backward linkages; multinational customers; suppliers; forced linkage (search for similar items in EconPapers)
JEL-codes: F23 O12 (search for similar items in EconPapers)
Date: 2013
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