Liquidity Constraints and Linkages with Multinationals

LICOS Discussion Paper No. 225/2008

26 Pages Posted: 20 Mar 2009

See all articles by Beata Smarzynska Javorcik

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; World Bank - Development Research Group (DECRG); Centre for Economic Policy Research (CEPR)

Mariana Spatareanu

Rutgers University Department of Economics and Division of Global Affairs

Date Written: 2008

Abstract

Using a unique data set from the Czech Republic for 1994-2003, this study examines the relationship between a firm's liquidity constraints and its supply linkages with multinational corporations (MNCs). The empirical analysis indicates that Czech firms supplying MNCs are less credit constrained than non-suppliers. A closer inspection of the timing of the effect, however, suggests that this result is due to less constrained firms self-selecting into becoming MNC suppliers rather than the benefits derived from the supplying relationship. As recent literature finds that productivity spillovers from foreign direct investment (FDI) are most likely to take place through contacts between MNCs and their local suppliers, our finding suggests that well-developed financial markets may be needed in order to take full advantage of the benefits associated with FDI inflows.

Keywords: foreign direct investment, cash flow, liquidity constraints

Suggested Citation

Javorcik, Beata Smarzynska and Spatareanu, Mariana, Liquidity Constraints and Linkages with Multinationals (2008). LICOS Discussion Paper No. 225/2008, Available at SSRN: https://ssrn.com/abstract=1360685 or http://dx.doi.org/10.2139/ssrn.1360685

Beata Smarzynska Javorcik (Contact Author)

University of Oxford - Department of Economics ( email )

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World Bank - Development Research Group (DECRG) ( email )

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HOME PAGE: http://econ.worldbank.org/staff/bjavorcik

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Mariana Spatareanu

Rutgers University Department of Economics and Division of Global Affairs ( email )

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Newark, NJ 07102
United States
973 353 5249 (Phone)
973 353 5819 (Fax)

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