How does the productivity of foreign-invested enterprises spill over to domestic firms in Vietnamese manufacturing?

Abstract

This paper investigates the evidence of productivity spillover from foreign-invested enterprises (FIEs) to local firms through horizontal, backward, and forward spillover channels, using establishment-level data from Vietnam in 2006-2017. The paper also considers the effects of foreign ownership types on the existence and magnitude of the productivity spillover. In addition, the paper examines whether the involvement of domestic firms in global production networks (GPNs) impacts on the nature of the spillover. The findings indicate that productivity from FIEs spills over to local firms through backward and forward channels, but not horizontal channels. Ownership structures of FIEs serve as an important determinant of productivity spillover: joint ventures tend to generate more significant positive productivity spillover to domestic firms than fully owned foreign firms. Lastly, local firms operating within GPNs benefit more from the presence of FIEs compared to those involved in horizontal specialization. Show more