1. Tine Jeppesen FIW Research Conference Vienna December 10 th 2010

2. 2  Research Question and Motivation  Contributions of paper  Theory & Literature  Data & Empirical methodology  Results  Conclusion

3. 3 Research Question  Does FDI affect the export participation and performance of domestic firms?  What are the channels of export spillovers? ◦ Horizontal / Vertical linkages Research Question & Motivation

4. 4 Why study export spillovers?  Promoting exports is common policy goal  Correlation between growth of real exports and real output (Greenaway 2004 European Journal of Political Economy)  Exporting causes productivity increases? De Locker (2007) JIE  Export spillovers may be an additional benefit from hosting FDI Research Question & Motivation

5. 5  Evidence from multiple countries  Region where FDI is increasing rapidly  Firm-level information on vertical linkages Contributions

6. 6 Theoretical Framework  Findings in empirical literature on export behaviour ◦ Sunk costs (Roberts & Tybout, 1997) ◦ Exporter are more productive than non-exporters (Bernard & Jensen ; Melitz, 2003)  MNEs can affect export performance of domestic firms by ◦ Lowering sunk costs ◦ Increasing domestic productivity Theory & Literature

7. 7  Foreign market information (Aitken et al. 1997 JIE)  Knowledge/ technology spillovers (labour movements, imitation)  Competition (Greenaway et al. 2004 European J. of political Economy) Channels of export spillovers: Horizontal spillovers Theory & Literature

8. 8  Greater scope for spillovers? (Javorcik, 2004 AER)  Evidence of productivity spillovers to upstream industries in Eastern Europe (Javorcik, 2004 AER ; Gorodnichenko et al. 2007 IZA; Javorcik and Spatareanu, 2009)  Information, reputational effects Theory & Literature

9. 9 Data  Enterprise Surveys, The World Bank Group  Firm-level data  Survey rounds: 2002, 2005, 2008/09  Survey universe ‘commercial, service or industrial business establishments with at least five fulltime employees’  2002 and 2005: Quota Sampling  2008/09: Stratified random sampling Data and empirical methodology

10. 10  23 countries Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Rep. Estonia, Georgia, Hungary, Kazakhstan, Kyrgyz Rep. Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Tajikistan, Turkey, Ukraine.  Manufacturing industries ISIC Rev.3.1: 15-37  Small, medium and large firms Data and empirical methodology

11. 11  Multinationals are bigger, more productive, use a higher share of foreign inputs, supply a higher share of inputs to other multinationals and are more export oriented than domestic firms.  The same differences are found between domestic exporters and non-exporters. Data and empirical methodology

12. 12  Heckman selection model  Exclusion restriction: International quality certification (ISO 9000, ISO 1400)  Model is estimated only on domestic firms. Exclude government owned enterprises.  Small sample size: Only include industries with more than 5 firms Empirical Strategy Data and empirical methodology

13. 13 Spillover Measures  Horizontal ◦ Hor_emp jkt ◦ Hor_exp jkt  Vertical ◦ Share of output sold to MNE within the country (2002, 2005) ◦ Share of inputs of foreign origin Data and empirical methodology

14. 14 Control variables  Industry level controls ◦ Industry share of total country exports ◦ Industry share of total country employment  Standard firm-level controls ◦ Labour productivity ◦ Employment ◦ Age  Country, year, industry dummies Data and empirical methodology

15. 15 Variable Mean non- exporters Mean exportersDifference Log of employment3.0614994.144874-1.08338*** Log of labour productivity9.71513810.39924-0.6841*** Age14.3482520.32116-5.97291*** MNE Sales0.0303270.07388-0.04355*** Foreign Input0.2378990.372583-0.13468*** Quality certificate0.1842630.434153-0.24989*** *** p<0.01, ** p<0.05, * p<0.1

16. 16 Industry level Data and empirical methodology

17. 17 Excluding vertical linkagesIncluding vertical linkages ParticipationPerformanceParticipationPerformance (1) (2)(3) (4) Hor_emp0.1050.791***-0.01940.582* Hor_exp-0.179-0.754***-0.288-0.840*** Mnesales0.617***0.423* Foreign input0.518***0.337* Expshare_ind0.979***0.724**0.2790.767* Empshare_ind0.117-0.2442.090***0.277 log employment0.516***1.404***0.416***1.495*** log employment 2 -0.0142-0.0275***-0.00212-0.0429** log labour prod.0.1540.908***-0.191.300*** log labour prod. 2 0.0006320.004180.0196**-0.0141 Age0.0017-0.00564***0.0034-0.00086 Quality certificate0.304***0.321*** Number obs.57342249 Uncensored obs.1752593 Log Likelihood-5369.27-1805.3 ρ 0.215*** 0.317*** Results: All Firms *** p<0.01, ** p<0.05, * p<0.1 Clustered adjusted standard errors in parentheses all regressions include country, year and industry dummies. Wald test rejects independence between participation and performance equation Constant not shown

18. 18 Results: Small Firms *** p<0.01, ** p<0.05, * p<0.1 Clustered adjusted standard errors in parentheses all regressions include country, year and industry dummies. Wald test rejects independence between participation and performance equation Constant not shown Excluding vertical linkagesIncluding vertical linkages ParticipationPerformanceParticipationPerformance (1) (2)(3) (4) Hor_emp-0.204 0.316-0.236-0.598 Hor_exp0.095-0.2710.1490.249 Mnesales0.724***1.220*** Foreign input0.400***0.642*** Expshare_ind0.798**1.456**-0.638-1.929 Empshare_ind0.2-1.6884.261***1.789 log employment0.2892.208***0.4381.571** log employment 2 0.036-0.24-0.0188-0.089 log labour prod.-0.170.907***-1.658***1.577*** log labour prod. 2 0.02060.005350.0917***-0.0246 Age-0.000538-0.0182**0.00371-0.0227** Quality certificate0.298***0.469*** Number obs.25631233 Uncensored obs.399178 Log Likelihood-1502.16-608.4 ρ 0.327** 0.453*

19. 19 Excluding vertical linkagesIncluding vertical linkages ParticipationPerformanceParticipationPerformance 1 23 4 Hor_emp0.2610.914***0.0920.627 Hor_exp-0.393**-0.940***-0.790***-1.024*** Mnesales0.550*0.234 Foreign input0.697***0.29 Expshare_ind1.132***0.5360.5850.704 Empshare_ind0.005440.05811.601*1.08 log employment0.816***1.481***0.987***1.930*** log employment 2 -0.0459**-0.0363*-0.0634-0.0857 log labour prod.0.355**0.844**0.2781.208 log labour prod. 2 -0.01150.00688-0.00721-0.00878 Age0.00238-0.00500***0.004090.000987 Quality certificate0.327***0.343*** Number obs.31711016 Uncensored obs.1353416 Log Likelihood-3795.56-1112.59 ρ 0.153*** 0.372*** Results: Larger Firms *** p<0.01, ** p<0.05, * p<0.1 Clustered adjusted standard errors in parentheses all regressions include country, year and industry dummies. Wald test rejects independence between participation and performance equation Constant not shown

20. 20 Conclusion  Effect of MNEs on domestic export performance is complex  Different effects of horizontal and vertical spillovers  Vertical linkages positively affects both export participation and intensity. Underlines importance of local linkages. Conclusion