Does It Matter Where You Come From? Vertical Spillovers from Foreign Direct Investment and the Nationality of Investors
The authors use a firm-level panel data set from Romania to examine whether the nationality of foreign investors affects the degree of vertical spillovers from foreign direct investment. Investors' country of origin may matter for spillovers t...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/11/5436447/matter-come-vertical-spillovers-foreign-direct-investment-nationality-investors http://hdl.handle.net/10986/14216 |
| Summary: | The authors use a firm-level panel data
set from Romania to examine whether the nationality of
foreign investors affects the degree of vertical spillovers
from foreign direct investment. Investors' country of
origin may matter for spillovers to domestic producers in
upstream sectors (supplying intermediate inputs) in two
ways. First, the share of intermediate inputs sourced by
multinationals from a host country is likely to increase
with the distance between the host and the source economy.
Second, the sourcing pattern is likely to be affected by
preferential trade agreements that cover some but not other
source economies. In this case, the Association Agreement
signed between Romania and the European Union (EU) implies
that inputs sourced from the EU are subject to a lower
tariff than inputs sourced from America or Asia. Moreover,
while for European investors intermediate inputs sourced
from home country suppliers comply with the rules of origin
and thus can be exported to the EU on preferential terms,
this would not be the case for home country suppliers of
American or Asian multinationals. Therefore, one would
expect that American and Asian investors source more from
Romania than EU investors and thus present greater potential
for vertical spillovers. The empirical analysis produces
evidence in support of the authors' hypothesis. They
find a positive association between the presence of American
and Asian companies in downstream sectors and the
productivity of Romanian firms in the supplying industries.
Further, the productivity of Romanian firms in the supplying
sectors is negatively correlated with operations of European
investors in downstream sectors. The differences between the
effects associated with investors of different origin are
statistically significant. |
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