EFFECT OF FIRM’S EXPORT-ORIENTATION ON BACKWARD SPILLOVERS OF FOREIGN DIRECT INVESTMENT IN TURKISH MANUFACTURING INDUSTRY

Year 2016, Volume: 5 Issue: 4, 351 - 359, 30.12.2016

Felor Ebghaei

https://doi.org/10.17261/Pressacademia.2017.357

Abstract

This study examines the direct and indirect or
spillover effects (horizontal and vertical) of FDI with special emphasis on the
backward spillover effects. My main purpose is to examine whether the effect of
backward spillovers generated by export oriented foreign owned firms is larger
on productivity of domestic firms than backward spillover effect generated by
domestic oriented foreign owned firms by using firm-level data for the years
2003-2011. With this purpose, value added and total factor productivity
equations with two different measures of backward spillover effects for Turkish
manufacturing industry firms are estimated by using the panel data method. My
empirical results are consistent with the existence of positive horizontal and
vertical spillovers of FDI. My estimation results also show that the backward
spillover generated by export oriented foreign owned firms is larger than the
backward spillover generated by domestic oriented foreign owned firms. 

Keywords

Foreign direct investment, spillover effects, backward spillovers, firm exports

References

• Aitken, B.J. & Harrison, A.E. 1999, "Do Domestic Firms Benefit From Foreign Direct Investment? Evidence from Panel Data", American Economic Review, vol. 89, no. 3, pp. 605-618.
• Ayyagari, M. & Kosova, R. 2008, "Does FDI facilitate Domestic Entry? Evidence from the Czech Republic", Can be downloaded at: http://ssrn.com/abstract=891781 (retrieved 20.09. 2014).
• Berlemann, M. & Wesselhöft, J. E. 2012, "Estimating Aggregate Capital Stocks Using the Perpetual Inventory Method", Working Paper, no. 125.
• Beugelsdijk, S., Smeets, R. & Zwinkels, R. 2008, "The Impact of Horizontal and Vertical FDI on Host’s Country Economic Growth", International Business Review, no. 17, pp. 452-472.
• Blalock, G. & Gertler, P. 2008, "Welfare Gains from Foreign Direct Investment through Technology Transfer to Local Suppliers", Journal of International Economics, no. 74, pp. 402-421.
• Blomstrom, M. & Kokko, A. 1998, "Multinational Corporations and Spillovers", Journal of Economic Surveys, vol. 12, no. 2, pp. 1-31.
• Colen, L., Maertens, M. & Swinnen, J. 2008, "Foreign Direct Investment as an Engine for Economic Growth and Human Development: A Review of the Arguments and Empirical Evidence", Working Paper, no. 16, pp. 1-48.
• De Mello, J. 1997, "Foreign Direct Investment in Developing Countries and Growth: A Selective Survey", Journal of Development Studies, vol. 1, no. 34, pp. 1-34.
• Driffield, N., Munday, M. & Roberts, A. 2002, "Foreign Direct Investment, Transactions Linkages, and the Performance of the Domestic Sector", International Journal of the Economics of Business, vol. 9, no. 3, pp. 335-351.
• Griliches, Z. & Mairesse, J. 1995, "Production Functions: the Search for Identification", NBER Working Paper, no. 5067.
• Hale, G. & Long, C. 2007, "Are there Productivity Spillovers from Foreign Direct Investment in China? ", Working Paper Series, Federal Reserve Bank of San Francisco.
• Hall, B.H. & Mairesse, J. 1995, "Exploring the Relationship between R&D and Productivity in French Manufacturing Firms", Journal of Econometrics, no. 65, pp. 263-293.
• Haskel, J.E., Pereira, S.C. & Slaughter, M.J. 2002, "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms? ", NBER Working Paper, no. 8724.
• Iyer, K. & Stevens, P. 2009, "Productivity Spillovers from Foreign Direct Investment in New Zealand Manufacturing", The New Zealand Association of Economists (NZAE) Conference: 1-3 July- Wellington.
• Javorcik, S.B. 2004, "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages", The American Economic Review, vol. 94, no. 3, pp. 605-627.
• Keller, W. 2004, "International Technology Diffusion", Journal of Economic Literature, no. XLII, pp. 752-782.
• Kolasa, M. 2008, "How does FDI Inflow Affect Productivity of Domestic Firms? The Role of Horizontal and Vertical Spillovers, Absorptive Capacity and Competition", The Journal of International Trade and Economic Development: An International and Comparative Review, vol. 17, no. 1, pp. 155-173.
• Konings, J. 2001, "The Effects of Direct Foreign Investment on Domestic Firms: Evidence from Firm Level Panel Data in Emerging Economies", Economics of Transition, vol. 9, no. 3, pp. 619-633.
• Köymen, S. & Sayek, S. 2010, "The Role of Human Capital In Productivity Spillovers from FDI: An Empirical Analysis on Turkish Manufacturing Firms", Discussion Papers, Bilkent University, no. 10-03.
• Liang, F.H. 2008, "Does Foreign Direct Investment Improve the Productivity of Domestic Firms? Technology Spillovers, Industry Linkages, and Firm Capabilities", Can be downloaded at: http://ssrn.com/abstract=1479837 (retrieved 12.04. 2014).
• Mishra, B.R. 2011, "Spill-over Effects of Foreign Direct Investment: An Econometric Study of Indian Firms", Munich Personal RePEc Archive (MPRA), no. 37759.
• Moulton, B.R. 1990, "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Units", The Review of Economics and Statistics, vol. 72, no. 2, pp. 334-338.
• Reganati, F. & Sica, E. 2005, "Do Domestic Firms Benefit from the Presence of MNEs? The Case of the Italian Manufacturing Sector", Dipartimento di Scienze Economiche, Matematiche e Statistiche, no. 23, pp. 1-15.
• Schoors, K. & Van der Tol, B. 2002, "Foreign Direct Investment Spillovers within and between Sectors: Evidence from Hungarian Data", Working Paper, no. 157, pp. 1-29.
• Stancik, J. 2007, "Horizontal and Vertical FDI Spillovers: Recent Evidence from the Czech Republic", Working Paper Series, no. 340, pp. 1-36.
• Taymaz, E. & Yılmaz, K. 2008, "Foreign Direct Investment and Productivity Spillovers", Working Papers and Koc University.
• Turkish Statistical Institute, Annual Industry and Service Statistics, TURKSTAT, Ankara.
• Turkish Statistical Institute, Annual Trade Statistics, TURKSTAT, Ankara.
• Xu, X. & Sheng, Y. 2012, "Productivity Spillovers from Foreign Direct Investment: Firm-Level Evidence from China", World Development, vol. 40, no. 1, pp. 62-74.