Spillovers, foreign investment, and export behavior

Abstract

Case studies of export behavior suggest that firms that penetrate foreign markets reduce entry costs for other potential exporters, either through learning effects or establishing commercial linkages. We examine whether spillovers associated with one firm's export activity reduce the cost of exporting for other firms. We identify two sources of spillovers: export production in general and the specific activities of multinationals. From a simple model of export behavior we derive a probit specification for the probability that a firm exports. Using panel data on Mexican manufacturing plants, we find evidence of spillovers from multinational enterprises but not from general export activity.

Demonstration or congestion? Export spillovers in Sweden

“…Strong positive effects of this kind have been previously found for Mexico (Aitken et al 1997), for Uruguay (Kokko et al 2001) and the United Kingdom Kneller and Pisu 2007). 11 Positive spillovers from FDI have not been found in all contexts, however.…”

“…The positive impacts come from demonstration or competition effects. These positive benefits might come in a number of different forms (Aitken et al 1997). For example, foreign multinationals may improve the information that domestic firms have about the preferences of foreign consumers, or the costs of serving those markets.…”

Foreign Direct Investment and Local Economic Development: Beyond Productivity Spillovers

“…This entry causes the third effect, namely a fall in the price of intermediates which favours customer firms through lower input prices. Customer firms can be both domestic or multinational final good producing 7 Technological externalities can also benefit indigenous firms' export performance (see Aitken et al, 1997, Barrios et al, 2003, which Blomström and Kokko (1998) refer to as "market access spillovers". A further way of looking at technological externalities leading to spillovers from foreign firms is by examining R&D spillovers (Bernstein, 1988 for Canada andWakelin, 2001 for the UK) and their effects on indigenous firms.…”

The pecking order of cross-border investment

“…In particular, foreign direct investment (FDI) is generally seen as a "good" type of capital because it may promote growth in host countries by encouraging a transfer of technology and knowledge and by opening market access abroad (e.g. Aitken, Hanson and Harrison 1997;Borensztein, De Gregorio and Lee 1998). On the other hand, portfolio investment flows are considered to be more volatile, may exacerbate the magnitude of business cycles and also induce or at least worsen financial crises (e.g.…”