The Role of Exports in the Transmission of Horizontal and Vertical Spillovers of Foreign Direct Investment: The Case of Turkish Manufacturing Industry

Abstract

This study examines the role of exports in the transmission of horizontal and vertical spillovers of foreign direct investment for the Turkish manufacturing industry by using firm‐level data. Our objective is to test whether the export capacity of firms is one of the determinants of the occurrence of the horizontal and vertical spillovers generated by foreign direct investment. In order to determine whether the productivity effects arising from horizontal and vertical (backward and forward) spillovers are conditioned by the exports of firms, value added and total factor productivity equations for Turkish manufacturing industry firms for the years 2003–11 are estimated using the panel data method. Our estimation results show that the productivity effects generated by horizontal, backward, and forward spillovers of foreign direct investment are more pronounced for export‐oriented firms.

Governance, Information Spillovers, and Productivity of Local Firms: Toward an Integrated Approach to Foreign Direct Investment and Global Value Chains

“…This finding is attributable to the fact that local firms are typically engaged in upstream activities such as parts supplying, whereas MNEs are mostly engaged in downstream activities. Only a few recent studies—Fernandes and Paunov () for Chile; Newman et al () for Vietnam; Fatima () for Turkey; Lu, Tao, and Zhu () for China; and Ebghaei and Wigley () for Turkey—find positive forward linkage effects (Tables and ). Recent survey articles, including Havranek and Irsova () and Rojec and Knell (), conclude that forward spillovers are smaller or less likely to occur than backward spillovers.…”

“…Rather than, or in addition to, estimating equation directly, some studies estimate TFP first and regress it on FDI spillovers and other control variables in equation . Representative examples of this are: Javorcik and Spatareanu (, 2011); Liu (); Blalock and Gertler (); Keller and Yeaple (); Barrios, Görg, and Strobl (); Fernandes and Paunov (); Merlevede, Schoors, and Spatareanu (); Newman et al (); Fatima (); Hong, Sun, and Huang (); Thang, Pham, and Barnes (); Choi and Pyun (); Lu, Tao, and Zhu (); Ebghaei and Wigley (); and Njikam and Leudjou (), as presented in Table . Note that they employ either level or first difference.…”

“…Since Javorcik's () path‐breaking study, many studies have found positive backward linkage effects based on equation and its modified forms: Bwalya () for Zambia; Blalock and Gertler () for Indonesia; Javorcik and Spatareanu (, ) for Romania; Gorodnichenko, Svejnar, and Terrell () for 17 transition market economies; Merlevede, Schoors, and Spatareanu () for Romania; Newman et al () for Vietnam; Fatima () for Turkey; Thang, Pham, and Barnes () for Vietnam; Lu, Tao, and Zhu () for China; and Ebghaei and Wigley () for Turkey (Tables and ). Recent survey articles, including Havranek and Irsova (), Javorcik (), and Rojec and Knell (), also conclude that interindustry effects are clearer than intra‐industry effects.…”

“…Based on the meta-analysis, Wooster and Diebel (2010), Havranek and Irsova (2011), and Irsova and Havranek (2013) conclude that horizontal spillovers are insignificant and the occurrence of positive effects may be derived from model misspecification or depend on specific characteristics of domestic economies and foreign investors. Indeed, a few studies find robust positive intra-industry effects by mostly using data from Asian countries (Wooster and Diebel 2010); for example, for MNEs in Korea (Choi and Pyun 2017) and Turkey (Ebghaei and Wigley 2018) and for R&D-performing MNEs in Indonesia (Todo and Miyamoto 2006) and Malaysia (Kinuthia 2016) (Tables 2 and 3).…”

Research on the Influence of the Intellectual Property Rights Protection on the Strategy of Multinational Enterprises (MNEs) and Foreign Direct Investment (FDI)

“…Vertical FDI, also known as trade-oriented FDI, is motivated by cheap labor and using local natural resources. A rough indicator of differentiation is the destination of the final product: products from affiliate of vertical FDI are used for export, while local sales in foreign markets are more likely to be a symbol of horizontal FDI (Ebghaei and Akkoyunlu, 2018). The level of FDI in mutual investment between developed countries has always been the mainstream of international FDI, and similar per capita income and factor endowments make the demand preferences of developed countries similarly, knowledge assets can be invested in branches in different regions withal loss-making, and multinational enterprises have the need to further expand production and take advantage of economies of scale and knowledge assets can be nearly lossless combined into different areas of the branch.…”