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DECTI Trade Seminar: Uncovering Horizontal Spillovers: When Foreign and Domestic Firms Share Common Local Input Suppliers

Sponsor: Development Economics and Chief Economist (DEC)

SpeakerHiau Looi Kee, World Bank

Abstract: Based on a sample of Bangladeshi garment producers, this paper links the within firm productivity gains of domestic firms to the increased presence of those FDI firms that share their local input suppliers, a finding that is consistent with horizontal spillovers from FDI. At sample mean,
horizontal spillovers can explain one third of the within firm productivity gains. Foreign firms may increase the demand for local inputs which leads to expansion of variety and benefit those domestic firms that use these inputs; Foreign firms may also make the local input suppliers better and indirectly help the domestic firms that use these suppliers. By focusing on these FDI firms that have closer ties with the domestic firms, this paper presents a plausible channel for horizontal spillovers to materialize.

For Information: Yasmin D Souza

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