Local Intermediate Inputs and the Shared Supplier Spillovers of Foreign Direct Investment

Local Intermediate Inputs and the Shared Supplier Spillovers of Foreign Direct Investment

Trade liberalizations have been shown to improve domestic firms' performance through the new varieties of imported intermediate inputs. This paper uses a unique, representative sample of Bangladeshi garment firms to highlight that local intermediate inputs may also enhance domestic firms' performance, through the shared supplier spillovers of foreign direct investment (FDI) firms. An exogenous EU trade policy shock is shown to cause some FDI firms in Bangladesh to expand, which led to better performance of the domestic firms that shared their suppliers. Overall, the shared supplier spillovers of FDI explain 1/4 of the product scope expansion and 1/3 of the productivity gains within domestic firms.

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Bibliographic Details
Main Author: Kee, Hiau Looi
Language:English
en_US
Published: World Bank Group, Washington, DC 2014-09
Subjects:ACCOUNTING, AGGREGATE DEMAND, AVERAGE PRODUCTIVITY, CAPITAL INVESTMENT, CLIMATE CHANGE, COMMON MARKET, COMMON MARKETS, CONSTRUCTION, CUSTOMS, DEVELOPMENT POLICY, E-MAIL, ECONOMETRICS, ECONOMIC DEVELOPMENT, ECONOMICS, ELASTICITY, ELASTICITY OF SUBSTITUTION, EQUIPMENT, EXPORT MARKETS, EXPORTS, EXTERNALITIES, FOREIGN DIRECT INVESTMENT, FOREIGN INVESTMENT, GDP, GLOBALIZATION, GOVERNMENT POLICIES, GROWTH MODELS, INPUT PRICES, INTERMEDIATE GOODS, INTERNATIONAL TRADE, MANUFACTURING, MANUFACTURING INDUSTRIES, MARGINAL COSTS, MARKET COMPETITION, MARKET SHARE, MARKET SHARES, MATERIAL, OPEN ACCESS, OPEN ECONOMY, OVERSEAS BUYERS, OWNERSHIP STRUCTURE, PECUNIARY EXTERNALITIES, PERFORMANCE INDICATORS, POLITICAL ECONOMY, POSITIVE EXTERNALITIES, PRICE INDEX, PRICE INDEXES, PRICE INDICES, PRICE LEVEL, PRODUCT QUALITY, PRODUCTION FUNCTION, PRODUCTION FUNCTIONS, PRODUCTION PROCESS, PRODUCTIVITY, PRODUCTIVITY GROWTH, REGRESSION ANALYSIS, RESULT, RESULTS, RETURNS TO SCALE, SEARCH, SUBSTITUTION, SUPPLIER, SUPPLIERS, SUPPLY CHAIN, TECHNOLOGY TRANSFER, TELECOMMUNICATIONS, TOTAL FACTOR PRODUCTIVITY, TOTAL OUTPUT, TOTAL REVENUE, TOTAL SALES, TRADE LIBERALIZATION, TRADE POLICIES, TRADE POLICY, UNEMPLOYMENT, USES, VALUE ADDED, WAGES,
Online Access:http://documents.worldbank.org/curated/en/2014/09/20251617/local-intermediate-inputs-shared-supplier-spillovers-foreign-directbrinvestment
https://hdl.handle.net/10986/20366
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Summary:Trade liberalizations have been shown to improve domestic firms' performance through the new varieties of imported intermediate inputs. This paper uses a unique, representative sample of Bangladeshi garment firms to highlight that local intermediate inputs may also enhance domestic firms' performance, through the shared supplier spillovers of foreign direct investment (FDI) firms. An exogenous EU trade policy shock is shown to cause some FDI firms in Bangladesh to expand, which led to better performance of the domestic firms that shared their suppliers. Overall, the shared supplier spillovers of FDI explain 1/4 of the product scope expansion and 1/3 of the productivity gains within domestic firms.

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