Tough Love: Do Czech Suppliers Learn from Their Relationships with Multinationals?

LICOS Discussion Paper No. 249/2009

28 Pages Posted: 25 Nov 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

Multiple version iconThere are 2 versions of this paper

Date Written: 2009

Abstract

Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. While the empirical studies have cast doubt on the existence of horizontal spillovers from FDI in developing countries, several recent papers have confirmed the presence of vertical spillovers, which take place through contacts between foreign affiliates and their local suppliers. However, the existing studies rely on industry-level proxies for vertical spillovers rather than information on actual relationships between local companies and multinationals. This study goes one step further by employing a unique dataset from the Czech Republic, which allows us to identify local firms supplying multinationals operating in the country. The data suggest that suppliers are different from other firms. They are larger, have a higher capital-labor ratio, pay higher wages and exhibit a higher productivity level. The evidence is suggestive of both high productivity firms having a higher probability of supplying multinationals as well as suppliers learning from their relationships with multinationals.

Keywords: foreign direct investment, technological spillovers, suppliers

JEL Classification: F21, F23

Suggested Citation

Javorcik, Beata Smarzynska and Spatareanu, Mariana, Tough Love: Do Czech Suppliers Learn from Their Relationships with Multinationals? (2009). LICOS Discussion Paper No. 249/2009, Available at SSRN: https://ssrn.com/abstract=1512462 or http://dx.doi.org/10.2139/ssrn.1512462

Beata Smarzynska Javorcik (Contact Author)

University of Oxford - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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Mariana Spatareanu

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

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