Multinationals and Linkages: An Empirical Investigation

Alfaro, Laura; Rodrı́guez-Clare, Andrés

doi:10.1353/eco.2004.0012

Cited by 103 publications

(87 citation statements)

References 54 publications

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“…Second, a wide gap remains between theoretical and empirical research (one exception is Alfaro and Rodríguez-Clare 2004). Theory and empirics have developed more or less independently.…”

Section: Resultsmentioning

confidence: 99%

Collecting the Pieces of the FDI Knowledge Spillovers Puzzle

Smeets¹

2008

The World Bank Research Observer

237

145

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Recent surveys of the empirical literature have concluded that the evidence is mixed on the magnitude, direction, and even existence of knowledge spillovers from foreign direct investment (FDI). This article reviews the recent theoretical and empirical literature that responds to these inconclusive results and considers three main issues: spillover channels, mediating factors, and FDI heterogeneity. Studies that take into account individual spillover channels find robust evidence of knowledge spillovers from FDI. Studies on the importance of mediating factors and FDI heterogeneity are less conclusive and could benefit from greater convergence in methodologies and greater specificity in the spillover channels of interest. More generally, many studies do not properly distinguish between knowledge spillovers and knowledge transfers, and empirical studies seem to greatly outnumber theoretical studies. JEL codes: F23, O33In the face of difficulties associated with capturing spillover effects and the multitude of factors that can influence the extent of spillovers in each economy, we caution researchers about drawing generalized conclusions about the existence of externalities associated with [foreign direct investment] . . . . (Javorcik and Spatareanu 2005, 47) Over the past decade or so a large body of research has examined knowledge spillovers from foreign direct investment (FDI). At several points along the way scholars have paused to take stock of the evidence (Blomström and Kokko 1998;Saggi 2002;Görg and Greenaway 2004). The verdict has largely been inconclusive. Indeed, the empirical inconclusiveness has become so infamous that virtually every study reviewed here begins with this observation as its main motivation. Explanations for the lack of conclusive results have focused on methodological and measurement issues (Görg and Strobl 2001), but this sort of approach has recently been disputed (Lipsey and Sjöholm 2005 The literature has developed in several directions to account for the ambiguity in earlier work. This study reviews these contributions, both theoretical and empirical. To provide some structure in a rapidly expanding field and to identify which approach or combination of approaches is likely to yield the most promising results, the study is structured around three themes. 1 More insight into the conditions under which knowledge spillovers from FDI are most likely to arise is especially important for developing countries. The highly ambiguous evidence to date on the existence of knowledge spillovers from FDI does not seem to warrant the large sums of money spent by governments to attract FDI. 2 After setting the stage in the following section, the article is then structured around figure 1, a representation of the FDI knowledge spillover process and the pieces of the puzzle that may affect it. 3 The section on opening the black box of FDI knowledge spillovers discusses the research on vertical linkages, worker mobility, and demonstration effects. This is followed by a review of the evidence o...

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“…Second, a wide gap remains between theoretical and empirical research (one exception is Alfaro and Rodríguez-Clare 2004). Theory and empirics have developed more or less independently.…”

Section: Resultsmentioning

confidence: 99%

Collecting the Pieces of the FDI Knowledge Spillovers Puzzle

Smeets¹

2008

The World Bank Research Observer

237

145

View full text Add to dashboard Cite

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“…In work on economic development and upgrading, the connection between foreign and local parties has been extensively researched under the rubric of "local linkages", and numerous studies focus on these linkages in less developed local economies (Brannon et al, 1994;Alfaro and Rodr guez-Clare, 2004;Chen et al, 2004). Research using the concept of a "technology gap" (e.g.…”

Section: Prior Workmentioning

confidence: 99%

How Demand Sophistication (De‐)limits Economic Upgrading: Comparing the Film Industries of South Africa and Nigeria (Nollywood)

Barnard

Tuomi

2008

Industry and Innovation

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More sophisticated demand is typically seen as an enabler of economic upgrading. This study questions this linearity and extends demand theory through a case analysis of the film industry in two developing countries. When unsophisticated local demand results in well-matched supply-and demand-side elements, benefits do accrue. Low exposure to technically superior products in Nigeria allowed a fully fledged film value chain to develop, as consumers were willing to support lower quality output. Although the industry is too weak to seriously threaten incumbents from the developed world on the global stage, it has substantial impact in its home country. In contrast, if demand is far more sophisticated than supply, local industry will struggle to respond to broad-based demand signals and will achieve accelerated learning only in niche areas. South Africa has become a niche producer in the global film industry rather than film producer in its own right partly because the widespread demand for Hollywood-quality products could not be met by local supply capabilities.

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“…The first is that the introduction of foreign technologies in host countries through multinational production can provide technology adoption opportunities for local firms by such means as demonstration effects (Burstein and Monge-Naranjo, 2009) and labor turnover (Markusen and Ethier, 1996). 2 The second possibility is that the presence of multinational firms increases the demand for intermediate goods and creates backward linkages to local suppliers. The strengthening of the supply chain could then result in forward linkages to local downstream producers in the form of lower input prices (Rodriguez-Clare, 1996; Markusen and Venables, 1999).…”

Section: Introductionmentioning

confidence: 99%

“…It reports an increase in the number of these changes from 77 in 1992 to 177 in 2006 with a peak of 270 in 2004. 2 The predominant role of multinational firms in knowledge creation is visible in aggregate statistics. Keller (2009) refers to data from the National Science Foundation showing that 83% of all manufacturing R&D in the US was conducted by parents of US multinationals in 1999.…”

Section: Introductionmentioning

confidence: 99%