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Impact of Foreign Direct Investment on Domestic Firms: Insights from Common Local Inputs Suppliers

This study examines how foreign investment affects local firms when sharing common local input suppliers. Analyzing data from Bangladeshi garment manufacturers, it finds positive performance effects for domestic firms with FDI presence served by local intermediate suppliers. Strengths include detailed data, robust econometrics, and consistent results across various firm performance measures. Suggestions for future research and implications for firms not involved in exports are discussed.

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Impact of Foreign Direct Investment on Domestic Firms: Insights from Common Local Inputs Suppliers

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  1. Local Intermediate Inputs, Foreign Direct Investment and the Performance of Domestic Firms: When Firms Share common Local Input Suppliersby H.L. Kee Comments by Michael Moore (GWU and IIEP)

  2. Foreign markets TFP Sales per worker Output per worker Domestic Producers

  3. Foreign markets TFP Sales per worker Output per worker Domestic Producers Imported intermediate goods

  4. Foreign markets TFP Sales per worker Output per worker Domestic Producers FDI Imported intermediate goods

  5. Foreign markets TFP Sales per worker Output per worker Domestic Producersi FDIi “siblings” in sector i Imported intermediate goods Domestic intermediate good producers

  6. “Everything But Arms” EU final market Non-EU final market Domestic Producers FDI “siblings” in sector i Domestic intermediate good producers of ai

  7. Data and Results • Universe of Bangladeshi garment manufacturers (1999-2003) • Positive effects on domestic firm performance (for many measures) with FDI presence served by domestic intermediate good producers

  8. Strengths of paper • Rich and detailed data set • Very careful and appropriate econometrics • Wide range of different specification with consistent results for various measures of firm performance • True for domestic firms that do not export to EU

  9. Suggestions FDIi ai Domestici Current

  10. Suggestions For i k FDIi ai ak Domestick

  11. Suggestions FDIi ai Domestici not involved in exports

  12. Unfair “complaint” • Careful empirics  Narrow lesson • FDI in other countries? • FDI in other Bangladeshi industries?

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