Working Paper: CEPR ID: DP1365
Authors: Magnus Blomström; Ari Kokko
Abstract: This paper examines spillover effects of the activities of multinational firms (MNCs). Such effects are most likely to be found in host countries, where the operations of foreign multinationals may influence local firms in the MNC?s own industry as well as firms in other industries. There is no comprehensive evidence on the exact nature or magnitude of these effects, however, 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 labour within multinationals complicates the analysis. The impact on the home country is likely to depend on what activities these firms concentrate on at home.
Keywords: multinational corporations; foreign investment; spillovers; technology transfer
JEL Codes: F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| MNC presence (F23) | local productivity (O49) |
| local capabilities and competition (L19) | MNC productivity spillovers (F23) |
| MNC presence (F23) | local firm performance (L25) |
| MNC operations (F23) | local firms' entry into foreign markets (F23) |
| local competition (L13) | strength of spillover effects (C21) |