Liberalisation,Multinational Enterprises and Export Performance: Evidence from Indian Manufacturing

This article tests two empirical hypotheses: one, MNE affiliates perform distinctly better than their local counterparts in the export markets in a globalised economy, and two, the MNE affiliates have greater comparative advantages in high-tech than in low- and medium-tech industries. Tobit estimates of a large data set of Indian manufacturing firms for the late 1990s provide relatively weak support to the first hypothesis. A disaggregated industry-group-wise analysis indicates that MNE affiliates perform no better than their local counterparts in high-tech industries. Thus, even with a higher level of integration with the global economy in the 1990s India appears to have failed in attracting efficiency-seeking FDI on a significant scale, particularly in high-tech industries. R&D and efficiency of manpower emerge as two significant determinants of international competitiveness in technology-based sectors (high- and medium-high tech sectors). Imports of raw materials enhance the export competitiveness of firms in all industry groups. Finally, large firms are found to be more export oriented, implying the need for creating large flagship companies in the country.     

Tansnationals and foreign trade: Evidence from Brazil

A recursive model of exports and imports of manufactures, in which imports depend in part on exports, is estimated using data for a cross‐section of 17,053 industrial firms. In this sample, 652 firms are foreign‐owned. Explanatory variables include firm size, skill intensity, advertising and other variables in addition to foreign ownership. Foreign ownership has a large, independent effect on both export performance and import propensities, but foreign ownership in itself explains little of the relatively low export/import ratios registered by affiliates of transnationals.     

How Responsive are Chinese Exports to Exchange Rate Changes? Evidence from Firm-level Data

This article examines the impact of exchange rate changes on Chinese firms’ decisions on export market entry and export share. Using a large dataset for Chinese firms in 2000–2006, we find that changes in exchange rate levels play a significant role on both export extensive and intensive margins of Chinese firms. Compared to studies using macro data, our firm-level analysis allows us to control for firm and industry heterogeneity. Firm size and location matter. We do not find a difference between foreign and domestic firms in responding to exchange rate changes. Industry heterogeneity is also found to be important.     

Expanding the levels of analysis of fdi for improved understanding of policy issues: the case of mexico

Foreign Direct Investment (FDI) inflows are a key component of the restructuring and external integration now underway in many Latin American national economies. This paper suggests that understanding of policy issues concerning FDI can be enriched by two complementary shifts in the levels of analysis of FDI, each of which entails more detailed attention to the strategies and operations of multinational corporations (MNCs). At the macro-level, we show why it is beneficial to expand beyond the normal analytic concern with aggregate total FDI flows to focus instead on the separate, disaggregated components of those flows--that is, equity, reinvested earnings and other long-term and short-term capital flows between parent firms and their affiliates, as recorded in the national balance of payments capital account. The microlevel shift emphasizes the importance of focusing on varieties of types of FDI, not only across different foreign investors but within individual companies as well. It demonstrates the significance of switching from the usual concentration on firms as a whole to instead accentuating examination of individual projects and products--especially the dichotomy between market-access projects producing for the host country domestic market and production-efficiency projects producing for export markets, including the home country market. These two shifts in the level of analysis complement one another, and they interact in the sense that the mix of component flows can depend in part on the type of FDI. These analytic themes are developed using evidence concerning FDI in Mexico, with special reference to the automotive industry. Such improved comprehension of FDI is particularly germane for Latin American countries that are contemplating liberalization of foreign direct investment rules or have already undertaken them and witnessed the ensuing increase of inbound FDI.     

An interpretation of argentine economic growth since 1930∗Part I

This study uses pairing of Mexican‐owned manufacturing firms and firms with direct United States investment, to examine the effects of ownership structure on firms’ performance and sources of technology. Results suggest that in terms of profitability, growth and export performance the Mexican firms were competing successfully during the period 1966–73. Furthermore, the basis for this strong posture by the Mexican manufacturers was not due to a heavy reliance on foreign technology imported through formal channels, but rather is linked with internal innovative activity and the use of domestic consultants.     

Local technological capability and productivity spillovers from FDI in the Uruguayan manufacturing sector

This article examines intra‐industry spillovers from FDI in Uruguayan manufacturing plants in 1988, to determine whether differences in the technology gap between locally‐owned plants and foreign affiliates have any impact on the relation between local productivity and foreign presence. We find a positive and statistically significant spillover effect only in a sub‐sample of locally‐owned plants with moderate technology gaps vis‐à‐vis foreign firms. Our interpretation is that there are firm‐specific differences in the ability to absorb spillovers, and that these may explain some of the contradictory findings of earlier spillover studies.     

Spatial Spillover Effects from Foreign Direct Investment in Vietnam

This paper investigates the role of inter-firm interaction and geographical proximity in the determination of productivity spillover effects from foreign to domestic firms. We developed an estimation approach using the Spatial Durbin model and applied this to a firm-level dataset from Vietnam from 2000–2005. We found that productivity spillovers diminished when the distance between foreign and domestic firms increases and that interactions among local firms amplify the spillovers. Within short distances, the presence of foreign firms creates positive backward, negative forward and horizontal spillovers. Based on the findings, several implications are extracted regarding promotion policy for foreign direct investment in developing countries.     

Evaluating differences in technological activity between transnational and domestic firms in Latin America

This study uses a sample of Latin American firms from four areas to compare the performance and technological activity of transnational to domestic firms. After accounting for scale, age and location of firm, we find few differences in either traditional methods of growth or profitability or in implementation of new technology embodied in processes or products. There are important differences in the sources of new technology. Domestic firms have a relatively higher level of internal innovative activity, whereas foreign firms rely more heavily (but not exclusively) on sources external to the subsidiary.     

Should the African lion learn from the Asian tigers? A comparative-historical study of FDI-oriented industrial policy in Ethiopia,South Korea and Taiwan

Ethiopia’s economy has been growing at breakneck speed for well over a decade now, earning the nickname as Africa’s lion. In recent years, the development literature on Ethiopia has paid particular attention to the role of industrial policy, especially the ways in which the Ethiopian experience compares to that of the Asian tigers. But through this comparative-historical perspective, little attention has been devoted to an important aspect of industrial policy in Ethiopia – foreign direct investment (FDI) in the manufacturing sector. This paper compares FDI-oriented industrial policy in Ethiopia in the current era (particularly focusing on light manufacturing) to that of South Korea and Taiwan between 1960 and 1990, arguably the two most generalisable cases among the Asian tigers. The paper argues that FDI-oriented industrial policy in Ethiopia seems to be bringing about short-term economic benefits, and is showing promise for further industrialisation. At the same time, it could benefit from taking more lessons from the long-term economic development perspective that characterised South Korea’s and Taiwan’s approach to FDI. Such a long-term perspective most importantly includes pro-active strategies to transfer technology from foreign firms to the domestic economy and the creation of backward linkages from foreign to domestic firms.     

Multinationals as Stabilisers? Economic Crisis,Access to Finance,and Employment Growth

This article examines the comparative response of multinationals and domestic firms to an economic crisis, using the empirical setting of a well defined case of economic slowdown in Chile. We find that employment in manufacturing plants has been drastically reduced during the economic crisis. Our findings reveal that multinationals are more likely to exit contributing to the employment contraction during the crisis, but surviving foreign firms experience lower employment reductions than domestic enterprises. These results are not fully consistent with the idea that multinationals are less affected by an economic crisis and that they may act as stabilisers.     

Multinational Enterprises and Technological Effort by Local Firms: A Case Study of the Malaysian Electronics and Electrical Industry

It is often assumed that foreign MNEs are the driving force behind technological development in developing economies but it has become evident in recent years that the actions of MNEs in isolation from the domestic economy will not significantly improve the stock of technology in an economy. This study, therefore, examines the determinants of local firms' decisions to undertake technological effort, not only in isolation, but also in the context of linkages between domestic firms and MNEs. There is evidence that linkages between MNEs and local firms are important in explaining technological effort by local firms but direct technological assistance from MNEs does not seem to play a major role in fostering increased technological effort by local firms.     

Building Ladders out of Chains: China's Hybrid-led Technological Development in Disaggregated Value Chains

In China, entrepreneurs hailing from ethnic Chinese transnational technology networks have linked up with global capital to create hybrid firms that combine relatively efficient foreign financing with a strategic commitment to intensive utilisation of domestic resources to create their core corporate competencies. This article refers to these firms as global hybrid firms and to development driven by these firms as hybrid-led development. Hybrids, given their generally small scale and scope, work best in sectors exhibiting disaggregated value chains, fast clockspeeds and high technology-intensity. Patent data demonstrates that hybrids outperform other firms generally and especially in sectors exhibiting these three characteristics.     

The Politics of Telecommunications Regulation: State–Industry Alliance Favouring Foreign Investment in India

This paper explores the political economy of three significant policy decisions of the Congress–United Progressive Alliance government between November 2005 and February 2006. These decisions improved the regulatory incentives for the smaller and efficient firms in the Indian GSM industry, which were heavily dependent on foreign investment for their expansion. India's telecommunications sector became more attractive to foreign investors as a result of these regulatory changes. This was a notable departure from the past when government policy had favoured large domestic investors using CDMA technology who were not dependent on foreign capital. A globalisation friendly policy change occurred after a Centre-Left United Progressive Alliance coalition came to power. The paper argues that these decisions, which promoted both competition and foreign investment, occurred due to the increased sensitivity of the Department of Telecommunications towards the needs of the relatively smaller GSM service providers, driven by considerations of efficiency. They were not driven by a crisis of private investment, foreign pressure, or stealth. The shift occurred in normal times when the Department of Telecommunications under a persistent ministerial stewardship took on a regulator, which was less interested in engineering this shift. This globalisation-friendly strategy depended to a large extent on the particular industrial sub-sector that the ruling party or coalition supported for spreading telecommunications in India.     

Exports,Outward FDI and Technology Upgrading: Firm Level Evidence from India

This paper evaluates the individual and combined effects of exporting and outward foreign direct investments (OFDI) on firms’ technology investments at home using firm-level data from the pharmaceutical industry in India. The analysis accounts for unobserved firm heterogeneity and the endogeneity of the choice of foreign market participation, and shows that exporting has been an important channel through which Indian multinational expansion has encouraged greater domestic technological activity. However, all else constant, higher levels of OFDI have rather acted as substitutes for such technological efforts.     

Employment effects of output and technological progress in Malaysian manufacturing

A major factor contributing to the growth in industrial employment in Malaysia was the implementation of the export‐oriented industrialisation strategy. With the withdrawal of GSP privileges to the USA, the inevitable loss of comparative advantage in labour cost and the emergence of trading blocs, it is feared that the growth of the export‐oriented sectors in manufacturing will be impeded, causing a serious unemployment problem. This fear is compounded by the increasing shift to technology‐intensive methods of production which displace labour. This article shows that domestic demand and export expansion exert positive and almost equal influence on industrial employment. Any negative impact on employment due to a shortfall in exports could be neutralised if an appropriate choice of import‐substituting and export expansion policies is adopted. Displacement of labour due to the substitution effect of using technology‐ and capital‐intensive production is largely compensated for by the increase in labour utilisation due to the output effect of increased production for both the domestic and foreign markets.     

Attempting developmental regionalism through afta : The domestic sources of regional governance

The asean Free Trade Area ( afta ) has conventionally been explained as a project of open regionalism adopted by the asean member governments to attract foreign direct investment to the region through the 'carrot' of the single regional market. Yet, when the same governments incorporated an investment liberalisation component programme within the afta project in 1998, they opted to accord full national treatment and market access privileges to foreign (non- asean ) investors at least 10 years later than to domestic or asean national investors. Although member governments removed this particular discriminatory clause in September 2001, the fact that a distinction between foreign and domestic investors was adopted and maintained for a three-year period is puzzling given afta 's acknowledged role as a magnet for foreign investment. Although afta is clearly a response to the pressures of globalisation, the available theoretical models of the relationship between globalisation and regionalism are unable to account for this empirical anomaly because they do not make a distinction between foreign-owned and domestic-owned capital. This paper advances the notion of 'developmental regionalism' as a way to incorporate domestic-owned capital in analysing the globalisation-regionalism relationship, which allows for a more robust explanation of the empirical puzzle outlined above.     

Determinants of Efficiency in Least Developed Countries: Further Evidence from Nepalese Manufacturing Firms

Using a translog stochastic production frontier and maximum likelihood econometric methods, we estimate and model the determinants of firm level efficiency in the Nepalese context. Our results are broadly in line with theoretical expectations. We find that large firms are more efficient and that a higher capital intensity leads to inefficiency. There is no statistical evidence to suggest that foreign participation leads to efficiency improvements. Also, we do not observe any link between export intensity and efficiency improvement. We find that higher protection leads to inefficiency. Overall, our results suggest that an outward looking industrial strategy, which relies on less intervention and permits the development of large-scale industries, is conducive to efficiency improvement in least developed countries (LDCs) like Nepal.     

Foreign ownership and export performance in the large corporate sector of India

This paper examines the impact of foreign ownership on export performance by the largest corporate firms in India, to analyse whether the ‘monopolistic advantages’ of multinationals survive in its highly restrictive and regulated environment. After controlling for industrial characteristics and export incentives, foreign ownership has a positive impact on export performance. The statistical significance of the result is not very strong, but the finding counters earlier works based on simple comparisons of exports at the firm level. The analysis also sheds light on other influences of policy significance on export performance.     

Business groups,financing constraints and investment: the case of India

We examine the effect of business group affiliation on corporate investment behaviour in India. More specifically, we test whether group affiliation reduces financing constraints for the affiliated firms. We use a data set containing 694 listed Indian companies for the 1989–97 period. We estimate a simple investment equation and find evidence that the investment-cash flow sensitivity is much lower for group affiliates. This suggests that business group affiliates have better access to external funds than stand-alone firms.     

Foreign Ownership and Employment Growth in a Developing Country

Many developing countries would like to increase employment in the formal sectors. One way to accomplish this goal may be to encourage the entrance of foreign firms. We examine employment growth in Indonesian plants taken over by foreign owners from domestic ones. We also examine the effect of FDI during different trade regimes and the timing of employment effects following an acquisition. For plants that change the nationality of ownership, we find a strong effect of shifts from domestic to foreign ownership in raising the growth rate of employment, but no significant effects of shifts from foreign to domestic ownership.