Linkages with Multinationals and Domestic Firm Performance: The Role of Assistance for Local Firms

Abstract

This article uses firm-level data for 19 African countries to look at the link between domestic firms' business relationship with multinationals and their performance in terms of innovation and productivity. Quite uniquely, we also evaluate the importance of support received by the domestic firm, either from the government or the multinational business partner, for this link. Overall, our data analysis shows that for the average domestic firm, supplying to a foreign multinational in the country is positively associated with product innovation. Buying from a multinational is positively associated with labour productivity. These results are independent of any type of support from the government or multinationals. By contrast, we also find that domestic firms' process innovation activity is only positively associated with supplying a multinational if the firm also receives assistance from the government or multinational. Furthermore, we find that supplying a multinational is only positively associated with domestic firms' productivity if the firm received technology transfer from the multinational customers.Nous utilisons les données de 19 pays africains pour examiner le lien entre la relation d'affaires qu'ont les entreprises nationales avec les multinationales et leur degrès d'innovation ainsi que leur productivité. Nous évaluons également l'importance du soutien reçu par l'entreprise nationale, que ce soit de la part du gouvernement ou de l'entreprise multinationale partenaire. Dans l'ensemble, notre analyse des données montre que, pour l'entreprise nationale moyenne, le fait d'être le fournisseur d'une multinationale étrangère implantée dans le pays est associé à l'innovation des produits. Le fait d'acheter à une multinationale est associé à la productivité du travail. Ces résultats sont obtenus indépendemment de tout type de soutien gouvernemental ou des multinationales. En revanche, nous constatons aussi que l'innovation de procédé au sein des entreprises nationales n'est associée au fait d'être le fournisseur d'une multinationale que si l'entreprise reçoit également l'aide du gouvernement ou d'une multinationale. En outre, nous constatons qu'être fournisseur d'une multinationale n'est associé à la productivité des entreprises nationales que si l'entreprise a reçu le transfert de technologie des clients multinationaux.

Do local suppliers and local buyers benefit from foreign direct investment?: evidence from Indonesia

“…The FDI spillover impact on local suppliers is high knowledge transfer because foreign companies set up a certain level of quality standards on raw materials from local suppliers (Marlevede et al 2014). Foreign companies provide technical and managerial training to their suppliers (Gorg & Seric 2016). The empirical studies those indicated an impact of FDI on suppliers are Liang (2017), Suyanto et al (2014), Wang & Wong (2016).…”

Foreign-Versus Domestic-Owned firms in the Predicament ‘Cui bono?’

“…Also, we can see a similar result in the strong positive inclination of annual employment growth (the change in fulltime employment reported in the current fiscal year from a previous period) (Figure 1-d). Such developments are well confirmed in established literature that deals with effect from foreign direct investments (Egger et al, 2001;Javorcik, 2015;Görg and Seric, 2016). When it comes to capacity utilization based on comparison of the current output with the maximum output possible using the current inputs by firms, it can be said that there is no evidence to claim for certain a negative outcome.…”

“…Spillovers can be spawned through the movement of labor between vertically related industries using their skills acquired in a foreign firm for the purposes of a local one or creating spin-offs on their own. Nevertheless, this is all dependent on the level of integration of domestic firms into supply chains of foreign direct investments (Caves, 2007;Görg and Seric, 2016). Generally, foreign firms source internationally limiting the variety of the inputs produced in a local economy.…”

When Do Multinational Companies Consider Corporate Social Responsibility? A Multi‐country Study in Sub‐Saharan Africa

“…Overall, 2,113 foreign‐owned firms participated in the survey. The data has been used for former analysis of FDI in Africa (e.g, Amendolagine et al ; Görg and Seric ), but not yet with a focus on CSR. More details on the Africa Investor Survey 2010, the sampling procedure and quality assurance measures are provided in UNIDO ().…”