Liquidity Constraints and Linkages with Multinationals

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the prior written permission of the publisher. Terms of use: Documents in Liquidity Constraints and Linkages with MultinationalsBeata S. Javorcik * and Mariana Spatareanu ** Abstract: Using a unique data set from the Czech Republic for 1994-2003, this study examines the relationship between a firm's liquidity constraints and its supply linkages with multinational corporations (MNCs). The empirical analysis indicates that Czech firms supplying MNCs are less credit constrained than non-suppliers. A closer inspection of the timing of the effect, however, suggests that this result is due to less constrained firms self-selecting into becoming MNC suppliers rather than the benefits derived from the supplying relationship. As recent literature finds that productivity spillovers from foreign direct investment (FDI) are most likely to take place through contacts between MNCs and their local suppliers, our finding suggests that well-developed financial markets may be needed in order to take full advantage of the benefits associated with FDI inflows.

FDI, Productivity and Financial Development

“…In some recent work, Alfaro et al (2006) combine theory and a calibration approach to formalise the mechanism through which the trickle-down effect of FDI via backward linkages depends on the extent of local conditions: market structure, financial markets, competition for skilled and unskilled labour and other local conditions and quantify the properties of the model for realistic parameters. 14 Javorcik and Spatareanu's (2007) study shows that less liquidity constrained firms become MNE suppliers -underscoring the importance of well-developed financial markets for allowing firms to fully reap the benefits associated with FDI inflows. firms' success is, to some extent, determined by local characteristics such as the domestic level of human capital and the overall institutional level of the country.…”

“…14 14 Javorcik and Spatareanu's (2007) study shows that less liquidity constrained firms become MNE suppliers – underscoring the importance of well‐developed financial markets for allowing firms to fully reap the benefits associated with FDI inflows. …”

Does foreign direct investment promote growth? Exploring the role of financial markets on linkages

“…Their survey evidence reveals that one of the reasons multinationals in the Czech Republic, for example, do not source higher percentage of inputs domestically is the fact that local firms lack funding for investment necessary to become suppliers. 9 Javorcik and Spatareanu (2007) take one step forward and examine, using data from the Czech Republic, the relation between a firm's liquidity constraints and its supply linkages with multinational corporations. The empirical analysis indicates that Czech firms supplying MNEs are less credit constrained than non-suppliers.…”

Globalization And Innovation In Emerging Markets

“…11 In the most recent literature, work is being done to test the channels through which these spillovers are occurring. For example, Javorcik and Spartareanau (2007) ask whether it is through direct training or loans from MNEs. 12 An MNE is defined as a firm with 50% or more foreign ownership.…”