Tine Jeppesen FIW Research ConferenceViennaDecember 10th 2010

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Research Question and Motivation Contributions of paper Theory & Literature Data & Empirical methodology Results Conclusion

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Does FDI affect the export participation and performance of domestic firms?

What are the channels of export spillovers?◦ Horizontal / Vertical linkages

Research Question & Motivation

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Promoting exports is common policy goal Correlation between growth of real exports and real output

(Greenaway 2004 European Journal of Political Economy) Exporting causes productivity increases?

De Locker (2007) JIE Export spillovers may be an additional benefit from hosting

FDI

Research Question & Motivation

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Evidence from multiple countries

Region where FDI is increasing rapidly

Firm-level information on vertical linkages

Contributions

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Findings in empirical literature on export behaviour◦ Sunk costs (Roberts & Tybout, 1997)◦ Exporter are more productive than non-exporters (Bernard & Jensen ; Melitz, 2003)

MNEs can affect export performance of domestic firms by◦ Lowering sunk costs ◦ Increasing domestic productivity

Theory & Literature

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Foreign market information (Aitken et al. 1997 JIE)

Knowledge/ technology spillovers (labour movements, imitation)

Competition (Greenaway et al. 2004 European J. of political Economy)

Theory & Literature

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Greater scope for spillovers? (Javorcik, 2004 AER)

Evidence of productivity spillovers to upstream industries in Eastern Europe (Javorcik, 2004 AER ; Gorodnichenko et al. 2007 IZA; Javorcik and Spatareanu, 2009)

Information, reputational effects

Theory & Literature

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Enterprise Surveys, The World Bank Group Firm-level data

Survey rounds: 2002, 2005, 2008/09

Survey universe ‘commercial, service or industrial business establishments with at least five fulltime employees’

2002 and 2005: Quota Sampling 2008/09: Stratified random sampling

Data and empirical methodology

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23 countries

Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Rep. Estonia, Georgia, Hungary, Kazakhstan, Kyrgyz Rep. Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Tajikistan, Turkey, Ukraine.

Manufacturing industries ISIC Rev.3.1: 15-37

Small, medium and large firms

Data and empirical methodology

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Multinationals are bigger, more productive, use a higher share of foreign inputs, supply a higher share of inputs to other multinationals and are more export oriented than domestic firms.

The same differences are found between domestic exporters and non-exporters.

Data and empirical methodology

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Heckman selection model

Exclusion restriction: International quality certification (ISO 9000, ISO 1400)

Model is estimated only on domestic firms. Exclude government owned enterprises.

Small sample size: Only include industries with more than 5 firms

Data and empirical methodology

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Horizontal

◦ Hor_empjkt

◦ Hor_expjkt

Vertical

◦ Share of output sold to MNE within the country (2002, 2005)◦ Share of inputs of foreign origin

jkt

fjkt

emp

emp

jkt

fjkt

Exp

Exp

Data and empirical methodology

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Industry level controls◦ Industry share of total country exports◦ Industry share of total country employment

Standard firm-level controls◦ Labour productivity◦ Employment ◦ Age

Country, year, industry dummies

Data and empirical methodology

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VariableMean non-exporters

Mean exporters Difference

Log of employment 3.061499 4.144874-1.08338***Log of labour productivity 9.715138 10.39924-0.6841***

Age 14.34825 20.32116-5.97291***

MNE Sales 0.030327 0.07388-0.04355***

Foreign Input 0.237899 0.372583-0.13468***Quality certificate 0.184263 0.434153-0.24989***

*** p<0.01, ** p<0.05, * p<0.1

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Data and empirical methodology

0.2

.4.6

.81

Ind

ustr

y E

xp

ort

Sh

are

0 .2 .4 .6 .8 1Foreign Employment Share

Expshare_ind 95% CI

Fitted values

0.2

.4.6

.81

Ind

ustr

y E

xp

ort

Sh

are

0 .2 .4 .6 .8 1Foreign Export Share

Expshare_ind 95% CI

Fitted values

Industry Export Share & Foreign Presence

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Excluding vertical linkages Including vertical linkagesParticipation Performance Participation Performance

(1) (2) (3) (4)Hor_emp 0.105 0.791*** -0.0194 0.582*Hor_exp -0.179 -0.754*** -0.288 -0.840***Mnesales 0.617*** 0.423*Foreign input 0.518*** 0.337*Expshare_ind 0.979*** 0.724** 0.279 0.767*Empshare_ind 0.117 -0.244 2.090*** 0.277log employment 0.516*** 1.404*** 0.416*** 1.495***log employment2 -0.0142 -0.0275*** -0.00212 -0.0429**log labour prod. 0.154 0.908*** -0.19 1.300***log labour prod.2 0.000632 0.00418 0.0196** -0.0141Age 0.0017 -0.00564*** 0.0034 -0.00086Quality certificate 0.304*** 0.321***Number obs. 5734 2249Uncensored obs. 1752 593Log Likelihood -5369.27 -1805.3ρ 0.215*** 0.317***

Results: All Firms

*** p<0.01, ** p<0.05, * p<0.1Clustered adjusted standard errors in parentheses

all regressions include country, year and industry dummies.Wald test rejects independence between participation and performance equation

Constant not shown

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Results: Small Firms

*** p<0.01, ** p<0.05, * p<0.1Clustered adjusted standard errors in parentheses

all regressions include country, year and industry dummies.Wald test rejects independence between participation and performance equation

Constant not shown

Excluding vertical linkages Including vertical linkages

Participation Performance Participation Performance (1) (2) (3) (4)

Hor_emp -0.204 0.316 -0.236 -0.598

Hor_exp 0.095 -0.271 0.149 0.249

Mnesales 0.724*** 1.220***

Foreign input 0.400*** 0.642***

Expshare_ind 0.798** 1.456** -0.638 -1.929

Empshare_ind 0.2 -1.688 4.261*** 1.789

log employment 0.289 2.208*** 0.438 1.571**

log employment2 0.036 -0.24 -0.0188 -0.089

log labour prod. -0.17 0.907*** -1.658*** 1.577***

log labour prod.2 0.0206 0.00535 0.0917*** -0.0246

Age -0.000538 -0.0182** 0.00371 -0.0227**Quality certificate 0.298*** 0.469***Number obs. 2563 1233

Uncensored obs. 399 178

Log Likelihood -1502.16 -608.4ρ 0.327** 0.453*

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Excluding vertical linkages Including vertical linkages

Participation Performance Participation Performance 1 2 3 4Hor_emp 0.261 0.914*** 0.092 0.627Hor_exp -0.393** -0.940*** -0.790*** -1.024***Mnesales 0.550* 0.234Foreign input 0.697*** 0.29Expshare_ind 1.132*** 0.536 0.585 0.704Empshare_ind 0.00544 0.0581 1.601* 1.08log employment 0.816*** 1.481*** 0.987*** 1.930***log employment2 -0.0459** -0.0363* -0.0634 -0.0857log labour prod. 0.355** 0.844** 0.278 1.208log labour prod.2 -0.0115 0.00688 -0.00721 -0.00878Age 0.00238 -0.00500*** 0.00409 0.000987Quality certificate 0.327*** 0.343***Number obs. 3171 1016Uncensored obs. 1353 416Log Likelihood -3795.56 -1112.59

ρ 0.153*** 0.372***

Results: Larger Firms

*** p<0.01, ** p<0.05, * p<0.1Clustered adjusted standard errors in parentheses

all regressions include country, year and industry dummies.Wald test rejects independence between participation and performance equation

Constant not shown

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Effect of MNEs on domestic export performance is complex

Different effects of horizontal and vertical spillovers

Vertical linkages positively affects both export participation and intensity. Underlines importance of local linkages.

Conclusion