Understanding FDI Spillovers in the Presence of GVCs
Does a global value chain framework provide additional insights into the question of whether foreign direct investment is beneficial to host countries? The literature has found mixed results on whether foreign direct investment provides positive sp...
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/149331619640987210/Understanding-FDI-Spillovers-in-the-presence-of-GVCs http://hdl.handle.net/10986/35523 |
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okr-10986-355232022-09-20T00:09:19Z Understanding FDI Spillovers in the Presence of GVCs Mercer-Blackman, Valerie Xiang, Wei Khan, Fahad FOREIGN DIRECT INVESTMENT GLOBAL VALUE CHAIN LABOR PRODUCTIVITY SPILLOVERS INPUT-OUTPUT LINKAGES ENTERPRISE SURVEY FIRM PERFORMANCE Does a global value chain framework provide additional insights into the question of whether foreign direct investment is beneficial to host countries? The literature has found mixed results on whether foreign direct investment provides positive spillovers over and above mere financing. But the studies have focused on one country, or studies with an international focus tend to abstract from intersectoral linkages. By examining this question in the context of global value chains, this paper provides a much better understanding of the association as well as general validity. It harmonizes three major panel data sets: 1) the Multi-Regional Input-Output table for international input-output linkages, 2) the FDI Markets reports for greenfield foreign direct investment, and 3) the World Bank Enterprise Surveys for firm performance measures. The paper produces a rich panel data set from 2011 to 2017. The findings show that foreign direct investment has a positive effect on labor productivity in sectors and firms within those sectors. Moreover, global value chain participation plays a key role in shaping the foreign direct investment effects. Sectors with lower global value chain participation benefit more from foreign direct investment: doubling the foreign direct investment in those sectors results in an 8 percent productivity gain. The positive effect seems to be due to the increased competition created by foreign direct investment. Foreign direct investment spillovers also take place through domestic and foreign backward linkages, which means that foreign direct investment also has positive inter-sector and cross-border spillovers. 2021-04-29T14:58:10Z 2021-04-29T14:58:10Z 2021-04 Working Paper http://documents.worldbank.org/curated/en/149331619640987210/Understanding-FDI-Spillovers-in-the-presence-of-GVCs http://hdl.handle.net/10986/35523 English Policy Research Working Paper;No. 9645 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
FOREIGN DIRECT INVESTMENT GLOBAL VALUE CHAIN LABOR PRODUCTIVITY SPILLOVERS INPUT-OUTPUT LINKAGES ENTERPRISE SURVEY FIRM PERFORMANCE |
| spellingShingle |
FOREIGN DIRECT INVESTMENT GLOBAL VALUE CHAIN LABOR PRODUCTIVITY SPILLOVERS INPUT-OUTPUT LINKAGES ENTERPRISE SURVEY FIRM PERFORMANCE Mercer-Blackman, Valerie Xiang, Wei Khan, Fahad Understanding FDI Spillovers in the Presence of GVCs |
| geographic_facet |
South Asia |
| relation |
Policy Research Working Paper;No. 9645 |
| description |
Does a global value chain framework
provide additional insights into the question of whether
foreign direct investment is beneficial to host countries?
The literature has found mixed results on whether foreign
direct investment provides positive spillovers over and
above mere financing. But the studies have focused on one
country, or studies with an international focus tend to
abstract from intersectoral linkages. By examining this
question in the context of global value chains, this paper
provides a much better understanding of the association as
well as general validity. It harmonizes three major panel
data sets: 1) the Multi-Regional Input-Output table for
international input-output linkages, 2) the FDI Markets
reports for greenfield foreign direct investment, and 3) the
World Bank Enterprise Surveys for firm performance measures.
The paper produces a rich panel data set from 2011 to 2017.
The findings show that foreign direct investment has a
positive effect on labor productivity in sectors and firms
within those sectors. Moreover, global value chain
participation plays a key role in shaping the foreign direct
investment effects. Sectors with lower global value chain
participation benefit more from foreign direct investment:
doubling the foreign direct investment in those sectors
results in an 8 percent productivity gain. The positive
effect seems to be due to the increased competition created
by foreign direct investment. Foreign direct investment
spillovers also take place through domestic and foreign
backward linkages, which means that foreign direct
investment also has positive inter-sector and cross-border spillovers. |
| format |
Working Paper |
| author |
Mercer-Blackman, Valerie Xiang, Wei Khan, Fahad |
| author_facet |
Mercer-Blackman, Valerie Xiang, Wei Khan, Fahad |
| author_sort |
Mercer-Blackman, Valerie |
| title |
Understanding FDI Spillovers in the Presence of GVCs |
| title_short |
Understanding FDI Spillovers in the Presence of GVCs |
| title_full |
Understanding FDI Spillovers in the Presence of GVCs |
| title_fullStr |
Understanding FDI Spillovers in the Presence of GVCs |
| title_full_unstemmed |
Understanding FDI Spillovers in the Presence of GVCs |
| title_sort |
understanding fdi spillovers in the presence of gvcs |
| publisher |
World Bank, Washington, DC |
| publishDate |
2021 |
| url |
http://documents.worldbank.org/curated/en/149331619640987210/Understanding-FDI-Spillovers-in-the-presence-of-GVCs http://hdl.handle.net/10986/35523 |
| _version_ |
1764483211929321472 |