Multinational Corporations and Spillovers

Abstract

This paper examines spillover effects of the activities of multinational firms. Such effects are most likely to be found in host countries, where the operations of foreign multinationals may influence local firms in the MNCs own industry as well as firms in other industries. However, there is no comprehensive evidence on the exact nature or magnitude of these effects, although it is suggested that host country spillovers vary systematically between countries and industries. In particular, the positive effects of foreign investment are likely to increase with the level of local capability and competition. The spillovers to the home countries of MNCs are often more difficult to identify, for various reasons. Earlier studies suggest that the effects are generally positive, but the increasing international division of labor within multinationals complicates the analysis. The impact on the home country is likely to depend on what activities these firms concentrate at home.

The Determinants and Impacts of Foreign Direct Investment in Nigeria

“…It is sometimes questioned whether FDI contributes to the broader aspects of economic growth as well as reinvestment of income in host economies. Besides, the presence of foreign firms can affect the efficiency of local industry (refer to as adverse spillover argument) (Blomstrom and Kokko, 1998). This argument tends to be more tenable when the multinational corporations are producing for the host country's market.…”

Bargaining between local governments and multinational corporations in a decentralised system of governance: the cases of Ogan Komering Ilir and Banyuwangi districts in Indonesia

“…On the one hand, FDI may enhance the economic growth of the host country (Bloostrom & Kokko, 1998;Rodriguez-Clare, 1996;Graham & Krugman, 1991), improve the quality of life of its people (Moran, 2011;Colen, Maertens & Swinnen, 2009;Baghirzade, 2012), and improve its economic, institutional and legal reform (Zhan, 1993). On the other hand, Moran (2011) asserts that the contribution of FDI to economic development differs considerably, depending on the economic sector involved.…”

Effects of Foreign Presence in a Transition Economy: Regional and Industrywide Investments and Firm-Level Exports in Ukrainian Manufacturing

“…Generally, human capital is an important determinant of the distribution of foreign direct investment in developing countries (Noorbakhsh et al, 2001). 10 Demonstration effects are potentially very important for many countries and industries according to Blomström and Kokko (1998). De Backer and Sleuwagen (2003) present an analysis of Belgian manufacturing firms and show evidence of positive long-term demonstration effects.…”