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While the positive productivity spillover from Foreign Direct Investment (FDI) to
domestic owned firms in host countries is unequivocally emphasized in theory, the empirical
evidence is contradictory. This paper, based on firm level data in Vietnam (enterprise census,
2000-2005), provides more inside on that. Using time-varying stochastic frontier...
Contexts in source publication
Context 1
... estimation results using those productivity measurements are presented in the rst three columns of Table 2. ...
Context 2
... difference can be interpreted from the underlying assumptions (capital endogeneity, full efcient, return of scale) and the possible bias that non-stochastic frontier approach can bring about. The results used for our interpretation on productivity spillovers are presented in last four columns of Table 2; among which the rst one is the model estimated for TFP change; the next three columns are the model with each TFP change components. ...
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Citations
... This finding is also not something new for Vietnam nor in spillover literature. For Vietnam, Tran[26] used the dataset for 2000-05 and pointed out that the presence of FDI has negative effect on technological progress of local firms. Similarly, Suyanto and Salim ...
Book chapter: FDI is a key driver of Vietnam’s economic growth. This paper, using Vietnam’s annual enterprise census and innovation survey data, aims at investigating the relationship between FDI firms and Vietnamese private firms' innovation activities and productivity. The finding shows that the presence of FDI firms
has almost no correlation with innovation probabilities of local firms. At the same time, it also has statistically insignificant effect to the local firms’ technological progress as well as efficiency. However, it appears to positively affect labor productivity (LP). Given the results, productivity policies should focus more on improving domestic firms’ innovation capabilities in line with promoting the linkages between them and the FDI firms.
... This shows that provinces that have received the most FDI enjoy a larger productivity gain than their peers. It is important to note that while our result contradicts those of Thang (2011), Athukorala and Tien (2012), and Anwar and Nguyen (2014), it is consistent with those of Nguyen (2008) and Trinh (2013), who find a positive foreign presence-TFP nexus in Vietnam. The positive effect of provincial foreign presence on TFP suggests that Vietnam's global integration policy that has attracted massive FDI inflows into host regions has surged TFP and, consequently, regional economic growth. ...
In the present study, we examine foreign direct investment (FDI)-induced productivity spillovers across 60 Vietnamese provinces from 2000 to 2016. Using a generalized method of moments technique, we find that foreign presence has a positive direct effect on total factor productivity (TFP). Furthermore, we discern a positive association between industrial linkages and productivity spillovers. All these findings remain robust to alternative model specifications. After accounting for the roles of human capital in the FDI–TFP nexus, we find absorptive capacity, as measured by human capital, to be a key factor influencing the nature of the foreign presence–productivity spillover nexus in the host province. Specifically, we observe that better human capital enables provinces to better internalize productivity spillovers from foreign presence. This result lends support to the view that human capital must surpass a critical threshold before the host can realize any productivity spillovers engendered by foreign presence.
... One of the most important outcomes that developing governments expected from attracting FDI enterprises is technology transfer, also known as technology spillover. Hence, most studies often focus on the technology spillover made by FDI firms to affect the productivity and output of host country's local firms (Hoang, Do, & Trinh, 2020;Hoang & Pham, 2010;Keller & Yeaple, 2009;Liu, Wang, & Wei, 2009;Salim & Bloch, 2009;Schoors & Merlevede, 2007;Suyanto & Nguyen, 2009;Tran, 2011). In fact, not all FDI enterprises create technology spillover and technology spillover is created not only from FDI enterprises, but also from domestic enterprises with different types of ownership. ...
The main objective of this study is to examine the interactive effect of technology spillover channels on business efficiency within the case study of manufacturing industry of Vietnam during the period from 2012 to 2018. The research model was developed with business efficiency as dependent variable and the relevant factors affecting the technology spillover capacity as independent variables. With a sample of 2,776 cross-sectional enterprises, panel data analysis approach was adopted to estimate the impact of technology spillover issue. Different spillover channels were also included in the analysis to enhance the empirical result. The study reveals that technology spillovers positively influence manufacturing business efficiency, in which horizontal spillover channel produces negative impact and vertical spillover channel, creates positive impact. Several factors that negatively affect the technology spillover capacity of businesses could be mentioned such as limited skills and experiences of workers, methods of implementing R&D, and the existence of FDI enterprises. Meanwhile, the rise of other factors related to joint-venture activities can help to increase the technology spillover capacity of businesses. In addition, skill and experience transfer makes a partial impact since this variable only positively affect the vertical spillover channel and provide no evidence of impact regarding horizontal spillover channel model.
... What is more, it is suggested that linkages with foreign direct investment (FDI) enterprises can be a good channel through which SMEs can indirectly integrate into GVCs without paying high entry costs to foreign markets (World Bank, 2017;Lopez-Gonzalez, 2017). These linkages can help to convey the spillovers of technology and knowledge from multinational companies (MNCs) to domestic firms (Nguyen et al.,2006;Nguyen & Nguyen, 2008;Tran, 2011;Thangavelu, 2014). Thus, through such linkages, SMEs can enhance their competitiveness and ability to participate directly in GVCs. ...
... As mentioned, FDI linkages are found to have positive spillovers on domestic firms' performance in hosting countries (Nguyen et al., 2006;Nguyen & Nguyen, 2008;Tran 2011). Several studies have also found evidence of FDI linkages on a firm's exports (Kneller & Pisu, 2007;Anwar & Nguyen, 2011a). ...
Using a multinomial logit model with the panel-data set of Vietnam manufacturing firms, this paper investigates the impacts of foreign direct investment (FDI) - small and medium enterprises (SMEs) linkages and other factors on SMEs’ participation in the global value chain (GVC). We consider GVC firms are those engaging in any of the three modes including (i) using domestic inputs to export (D2E), (ii) using imported inputs to produce for the domestic market (I2P), (iii) using imported inputs to export (I2E). We discover that FDI-SME linkages statistically encourage Vietnamese SMEs to integrate into the GVC via I2P and I2E, while no statistical association between FDI-SME linkage and D2E participation is found. GVCs participation likelihood is also positively correlated with the introduction of new product introduction. The establishment of firms’ production facilities in industrial zones and foreign ownership are both reported to be significantly decisive factors to SMEs’ decisions on GVC participation. Besides, there is a strong association between firms’ attributes, i.e. employment, capital intensity as well as financial access, and their participation in the GVC. Local governance quality (proxied by the Provincial Competitiveness Index) and the share of skilled labor at the province-level can facilitate firms’ integration into GVCs, while greater market concentration may be a hurdle to such potential.
... The focus on horizontal productivity spillover, rather than backward and forward productivity spillover, can be explained by the unavailability of data on the economic structure for intermediate input transactions. Only a few studies focus on different channels of productivity spillover, including horizontal, backward, and forward spillover (Huynh et al. 2021;Le and Pomfret 2011;Tran 2011), often with conflicting findings (Appendix A compares the results of empirical studies for the Vietnamese case). When the conditions of productivity spillover are considered, literature on the role of foreign ownership structure in determining spillover is still in its infancy. ...
This study traces the intersectoral linkages or the dependence of industries on one another in Vietnam’s economy within the period of 2000–2012 basing on the input–output analysis. The total linkages—computed using Leontief inverse—are generally employed amongst policymakers as an essential reference in choosing the critical industry. However, for many countries that heavily dependent on imported inputs like Vietnam, total linkages can give an erroneous result. The paper shows how important are the domestic linkages, which is the inverse net of imports, in analyzing the importance of industries in the economy. Constructing the non-competitive input–output tables relying on the assumption that imports are distributed across industries in the same proportion as the gross domestic output of the corresponding industry, the paper finds that there is a considerable divergence between total and domestic linkages. The results imply that import plays a significant role in the intersectoral linkages in the Vietnamese economy. The strength of linkages of some sectors is due to the import utilization effects, but not domestic sectors’ real own ability to create linkages.
... Others investigated the contribution of FDI to job creation, poverty reduction and economic growth (Pham, 2003). A few studies on spillover effects in Vietnam include Nguyen, Nguyen, Vu, and Nguyen (2006), Tran (2011), and Anwar and Nguyen (2014). Although Esiyok and Ugur (2015) did not examine the spillover effect, their work on FDI's spatial spillovers 3 locational determinants of FDI flows in Vietnam took spatial interdependence between provinces into account and found that the distribution of FDI between Vietnamese provinces is subject to agglomeration effects, suggesting a need to apply spatial econometric model to obtain unbiased estimates of spillover effects in Vietnam. ...
This paper investigates the role of inter-firm interaction and geographical proximity in the determination of productivity spillover effects from foreign to domestic firms. We developed an estimation approach using the Spatial Durbin model and applied this to a firm-level dataset from Vietnam from 2000–2005. We found that productivity spillovers diminished when the distance between foreign and domestic firms increases and that interactions among local firms amplify the spillovers. Within short distances, the presence of foreign firms creates positive backward, negative forward and horizontal spillovers. Based on the findings, several implications are extracted regarding promotion policy for foreign direct investment in developing countries.
... Others investigated the contribution of FDI to job creation, poverty reduction and economic growth (Pham, 2003). A few studies on spillover effects in Vietnam include Nguyen, Nguyen, Vu, and Nguyen (2006), Tran (2011), and Anwar and Nguyen (2014). Although Esiyok and Ugur (2015) did not examine the spillover effect, their work on FDI's spatial spillovers 3 locational determinants of FDI flows in Vietnam took spatial interdependence between provinces into account and found that the distribution of FDI between Vietnamese provinces is subject to agglomeration effects, suggesting a need to apply spatial econometric model to obtain unbiased estimates of spillover effects in Vietnam. ...
This paper investigates the role of inter-firm interaction and geographical proximity in the determination of productivity spillover effects from foreign to domestic firms. We developed an estimation approach using the Spatial Durbin model and applied this to a firm-level dataset from Vietnam from 2000–2005. We found that productivity spillovers diminished when the distance between foreign and domestic firms increases and that interactions among local firms amplify the spillovers. Within short distances, the presence of foreign firms creates positive backward, negative forward and horizontal spillovers. Based on the findings, several implications are extracted regarding promotion policy for foreign direct investment in developing countries.
... Firm-specific assets, such as marketing and management capabilities, technological know-how and reputation, that play important roles in Dunning's traditional Eclectic theory of FDI (Dunning, 2000;Dunning & Lundan, 2008), are fundamental to the argument that MNC ownership advantages should lead to relativity higher performances than their counterparts. This notion of performance differentials is the basis for the general hypothesis that FDI generates productivity spillovers Thang, 2011). ...
... In addition, MNCs are profit-driven and, therefore, are not interested in creating a knowledge transfer environment without receiving a good reward in exchange. For this reason, there are some potential costs associated with FDI inflows, such as an increase in unemployment and the emergence of more concentrated market structures, especially in economies in transition and developing countries (Appleyard & Field, 1998 Empirical research all over the world (Görg & Strobl, 2001) has shown that evidence on positive spillovers are contradictory or mixed and both empirical and theoretical studies have focused on explaining these mixed results (Thang, 2011). The author argues that an important conclusion of such studies is that the signal and magnitude of productivity spillovers depend on the nature of firms and industries and the conditions of host countries. ...
The increasing importance of foreign direct investment (FDI) to international production has prompted considerable interest in its real effects on host economies all over the world. The aim of this study was investigate whether the presence of FDI produces productivity spillovers in Brazilian processing industries. We conduct our analysis using a panel database on twenty-three Brazilian processing industries and applied Moderated Multiple Regression (MMR) and Generalized Linear Models (GLM) analysis of variance to address potential spillover effects from foreign presence. This paper finds evidences of the coexistence of both positive and negative effects arising from FDI on the productivity of Brazilian industries. We found negative effects for FDI presence in labor-intensive industries. Furthermore, FDI benefits depend on the absorptive capacity of industries, confirming the hypothesis that a minimum level of absorptive capacity is required so that locally owned enterprises (LOEs) can benefit from foreign presence.
This study employs the Williamson institutional analytical framework to analyze impacts of institutions on the business performance of Vietnamese enterprises. Major findings are threefold. Firstly, the estimations by propensity score matching and double difference reveal that privatization is significantly associated with better enterprise performance. Major privatization produces better outcomes than partial privatization and privatization had heterogeneous impacts between two periods, before and after 2007. Secondly, by using fixed effect regression on the on the panel data of 24999 non-state firms in the period 2006-2014, the study found that all business environment institutions have positive impacts on firm business outcomes, in which institution of property rights have the strongest effect. Thirdly, the analysis of corporate governance, which conducts random effects regressions on the panel data of World Bank Enterprises Survey in two year 2009 and 2015, provides evidence that good corporate governance practice likely to improve firm performance. Those findings highlight the need to design and implement more policies that contribute to quality improvement of business environment institutions, corporate governance and privatization in order to foster the development of enterprise system.
