Export Spillovers from FDI: Evidence from Polish firm-level data Andrzej Cieślik (University of Warsaw) Jan Hagemejer (National Bank of Poland)

Introduction & motivation  General spillovers from FDI:  MNE/FDI  productivity  „ideas gap” (Romer, 1993), "knowledge capital" (Markusen, 2002)  World Bank (1998/9 WDR): if emerging economies are to obtain more global knowledge they need to attract more FDI BUT:  Location-specific economies that help exports:  the geographic concentration of exports may make it feasible to construct specialized transport infrastructure, such as storage facilities or rail lines or may improve access to information about which goods are popular among foreign consumers (Aitken et al. 1997).  When exporting MNE’s are present in a region, they may reduce information assymetries by providing experience about participation in foreing markets to domestic firms  Same for sector specific exporter-focused spillovers Cieslik & Hagemejer, NBP & UW

Stylized facts  Share of multinational firms in Poland’s exports increased from 12% in 1992 to 61% in 2009  Frequently argued: Polish export expansion can be attributed to activity of multinational enterprises (MNEs).  Highly statistically significant positive partial correlation between FDI and Polish bilateral trade flows.  Kolasa (2009) examines the existence of productivity spillovers from FDI using the firm-level data combined with the economy-wide input output table. Finds that local firms benefit from foreign presence in the same industry and in downstream industries. Cieslik & Hagemejer, NBP & UW

MNE spillovers to export decision  Aitken et al. (1997) were the first to study the role of MNEs as a source of export spillovers for domestic firms in developing countries.  Probit model. Both MNE and export activity in general are important.  Similar model by Greenaway et al. (2004) for UK firms  Poland: Bedi and Cieslik (2000) used aggregate data for two digit manufacturing industries from Polish regions in the 1990s. Domestic firms operating in region-industries with a higher concentration of foreign firm export activity enjoy higher export volumes. Cieslik & Hagemejer, NBP & UW

Our contribution  various sources of export enhancing effects related to:  concentration of MNE export activity,  concentration of total MNE activity,  overall concentration of export activity  overall concentration of economic activity of exporters  overall concentration of economic activity of non-exporters.  Two dimensions of spillovers: sectoral and regional  Use firm-level data: the panel covers the recent period , financial statement and balance sheet, employment matched with sectoral and regional data Cieslik & Hagemejer, NBP & UW

The model  Cieslik & Hagemejer, NBP & UW

Profits (domestic market)  Cieslik & Hagemejer, NBP & UW

Profits from exporting (post-solution)  Cieslik & Hagemejer, NBP & UW

FDI spillovers  Impact of FDI can be captured by endogenizing two cost parameters β and f X.  Entry of MNE/FDI:  an increase in overall productivity of domestic firms due to decreased production costs because of general FDI knowledge/productivity spillovers that decreases the unit labor requirement β,  a decrease in the cost of exporting due to information spillovers associated with export activity of multinational firms which decreases parameter f X. Cieslik & Hagemejer, NBP & UW

The data  Firm-level dataset provided by the Polish Central Statistical Office (CSO).  It covers all medium and large size enterprises (employing at least 50 people) in Poland’s economy over the period of  financial statement survey, F-01  balance sheet survey, F-02.  information on the number of employees, form of ownership (foreign vs. domestic, private vs. state-owned) and on the geographical location of firm registration.  Match it with PPI data  Match it with CSO regional database (by year/region) Cieslik & Hagemejer, NBP & UW

Econometric strategy Cieslik & Hagemejer, NBP & UW

(1)(2) VARIABLESIndustryIndustry/Region log(tfp)0.0459***0.0460*** ( )( ) Firm's share in industry0.743**0.742** (0.343)(0.342) Employment0.141*** ( ) Fixed capital per employee0.0673*** ( )( ) Average wage0.0453***0.0452*** (0.0124) Majority state ownership (0.0194) Output (sec) (0.0278) Exports (sec)0.0817***0.0820*** (0.0209) MNE output (sec) (0.0173) MNE exports (sec) (0.0147) Output (reg) (0.0613) Exports (reg) 0.101** (0.0494) MNE output (reg) (0.0316) MNE exports (reg) (0.0340) Observations40,832 TABLE II. Probit Regression Results: Baseline Results. Robust standard errors in parentheses, estimations include time, regional and industry dummies *** p<0.01, ** p<0.05, * p<0.1

(1)(2)(3) VARIABLESIndustryIndustry/Region log(tfp)0.0473***0.0476*** ( ) ( ) Firm's share in industry0.794**0.793**0.791** (0.346)(0.345) Employment0.140*** ( )( ) Fixed capital per employee0.0672***0.0673*** ( ) Average wage0.0438***0.0436*** (0.0124) Majority state ownership (0.0195) Non-MNE non-exporter domestic output (sec) *** *** ( ) Non-MNE exporter domestic output (sec)0.0350***0.0352***0.0355*** (0.0112) Non-MNE exports (sec)0.0190** ** ( ) MNE output (sec) (0.0131) MNE exports (sec)0.0253**0.0245**0.0224*** (0.0102) ( ) Non-MNE non-exporter domestic output (reg) (0.0183)(0.0185) Non-MNE exporter domestic output (reg) (0.0217)(0.0221) Non-MNE exports (reg) **0.0389** (0.0174)(0.0175) MNE output (reg) (0.0261) MNE exports (reg) * (0.0235)(0.0199) MNE domestic output (sec) ( ) MNE domestic output (reg) (0.0157) Observations40,673 TABLE III. Probit Regression Results: Exporters vs. Non-exporters Robust standard errors in parentheses, estimations include time, regional and industry dummies *** p<0.01, ** p<0.05, * p<0.1

(1)(3)(4)(5) VARIABLESRegression 1Regression 3Regression 4Regression 5 log(tfp)0.0480***0.0352*** * ( )(0.0103)(0.0106)( ) Firm's share in industry0.785**0.622**0.393* (0.344)(0.275)(0.216)(0.119) Employment0.140***0.131***0.127***0.0356*** ( )( )( )( ) Fixed capital per employee0.0670***0.0545***0.0337*** *** ( )( )( )( ) Average wage0.0427***0.0389***0.0453***0.0226*** (0.0124)(0.0141)(0.0144)( ) Majority state ownership *** (0.0195)(0.0214) ( ) Non-MNE non-exporter domestic output (sec) *** ( ) *** ( ) *** ( ) *** ( ) Non-MNE exporter domestic output (sec) *** (0.0112) *** (0.0133) (0.0132) *** ( ) Non-MNE exports (sec)0.0203**0.0357***0.0716***0.0560*** ( )(0.0105)(0.0104)( ) MNE domestic output (sec) ( )( )( )( ) MNE exports (sec)0.0235***0.0319***0.0223***0.0150*** ( )( )( )( ) Non-MNE non-exporter domestic output (reg) (0.0186) (0.0203) (0.0198) ( ) Non-MNE exporter domestic output (reg) (0.0222) (0.0238) (0.0230) (0.0110) Non-MNE exports (reg)0.0394** ***0.0214** (0.0179)(0.0196)(0.0191)( ) MNE non-exporter domestic output (reg) ( ) ( ) ( ) ( ) MNE exporter domestic output (reg) ** ** (0.0137)(0.0148)(0.0147)( ) MNE exports (reg) ** (0.0208)(0.0229)(0.0222)(0.0109) Observations40,24040,256 39,851 TABLE IV. Probit regression results: Exporting vs. Non-exporting MNEs. Robust standard errors in parentheses, estimations include time, regional and industry dummies *** p<0.01, ** p<0.05, * p<0.1

Summary and Conclusions  we studied the impact of FDI on export activity of domestic firms in Poland using the Polish firm level data for  we distinguished between spillovers related to the concentration of MNE export activity and the spillovers related to the concentration of MNE total economic activity at the sectoral and regional levels, having controlled for the overall concentration of economic activity, the overall concentration of export activity as well as a number of other firm, industry and regional characteristics

 the measure of sectoral concentration of MNE export activity displayed a positive sign and were statistically significant  only one channel (MNE export activity at the sectoral level) of knowledge spillovers from MNEs is important for export activity of domestic firms in Poland  MNE output concentration was not statistically significant neither at the sectoral nor the regional levels (no positive general productivity spillovers) Cieslik & Hagemejer, NBP & UW Summary and Conclusions