Technology Spillover Effects and Policies: Evidence from Vietnam

  • Ngoc Minh NGO Faculty of Business Administration, Industrial University of Hochiminh City, Vietnam

Abstract

The paper examines empirical research on technology spillover effects from foreign invested enterprises (FIEs) to domestic manufacturing and processing firms in the North of Vietnam in 2016-2018 period. The Hausman test demonstrates Fixed Effects Model is suitable for the most-updated panel data. The empirical results indicate that FIEs create a pervasive effect on the productivity of domestic manufacturing and processing firms. However, the technology spillover effect depends on characteristics of domestic enterprise. Accordingly, the capitalization rate and production scale are positively correlated with technology spillover while the technology gap is negatively. This finding is useful for authorities to map out policies for domestic firms to absorb more effectively technology spillover effect from FIEs.

References

[1] Aitken, L.S., West, S.G., and Reno, R.R. 1991. Multiple Regression: Testing and Interpreting Interactions, New York: Sage.
[2] Aitken, B.J., and Harrison, A.E. 1999. Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela, American Economic Review, Vol. 89, 605–618. http://dx.doi.org/10.1257/aer.89.3.605.
[3] Fujimori, A., and Sato, T. 2015. Productivity and technology diffusion in India: The spillover effects from foreign direct investment, Journal of Policy Modeling, Vol. 37, 630–651.DOI: 10.1016/j.jpolmod.2015.04.002.
[4] Baltagi, B. 2008. Econometric Analysis of Panel Data. (5th ed. ed.). New York: John Wiley & Sons Inc.
[5] Bhagwati, J. 1973. The Theory of Immiserizing Growth: Further Applications’, in M. B. Connolly, and A. K. Swoboda., eds. International Trade and Money, University of Toronto Press, Toronto.
[6] Bin Ni, Spatareanu, M., Manole, V., Otsuki, T., and Yamada, H. 2017. The origin of FDI and domestic firms’ productivity-Evidence from Vietnam, Journal of Asian Economics, Vol. 52, 56-76. Available at SSRN: https://ssrn.com/abstract=3061329.
[7] Blalock, G., Gertler, P. 2009. How Firm Capabilities Affect Who Benefits from Foreign Technology. Journal of Development Economics, Vol. 90, No. 2, 192–99.
[8] Pham, B.N. 2012. Trade Liberalization and Productivity Spillover from Different Foreign Direct Investment Sourcing Origins. Journal of International Business Research, Vol.11, No. 3, 71-88.
[9] Caves, R.E. 1974. Multinational Firms, Competition, and Productivity in Host-country Markets. Economica, Vol. 41, No.162, 176-193.
[10] Orlic, E., Hashi, I., and Hisarciklilar, M. 2018. Cross sectoral FDI spillovers and their impact on manufacturing productivity. International Business Review, Vol. 27, 777-796. DOI: 10.1016/j.ibusrev.2018.01.002.
[11] Farole, T., Winkler, D. 2014. Making Foreign Direct Investment Work for Sub-Saharan Africa: Local Spillovers and Competitiveness in Global Value Chains. Directions in Development-Trade; Washington, DC: World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/16390 License: CC BY 3.0 IGO.
[12] Farole, T., and Winkler, D. 2015. The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI Spillovers. Journal of Banking and Financial Economics,Vol. 1, No. 3, 77-112.
[13] Hale, G., and Long, C. 2011. Are the productivity spillovers from foreign direct investment in China? Pacific Economic Review, 16 (2), 135-153. SSRN: https://ssrn.com/abstract=1830939 or http://dx.doi.org/10.1111/j.1468-0106.2011.00539.x.
[14] Globerman, S. 1979. Foreign Direct Investment and Spillover Efficiency Benefits in Canadian Manufacturing Industries. Canadian Journal of Economics, Vol. 12, No.4, 42-56.
[15] Gujarati, D. 2011. Econometrics by Example. London: Palgrave Macmilan.
[16] Imbriani, C., Pittiglio, R., Reganati, F., and Sica, E. 2014. How Much do Technological Gap, Firm Size, and Regional Characteristics Matter for the Absorptive Capacity of Italian Enterprises? International Advances in Economic Research, Vol. 20, No.1, 57-72. DOI: 10.1007/s11294-013-9439-7.
[17] Jaccard, J., and Turrisi, R. 2003. Interaction Effects in Multiple Regression, New York: Sage.
[18] Jordaan, J. 2011. Local Sourcing and Technology Spillovers to Mexican Suppliers: How Important are FDI and Supplier Characteristics? Growth and Change, Vol. 42, No. 3, 287-319. https://doi.org/10.1111/j.1468-2257.2011.00554.x.
[19] Hayes, A.F. 2013. Introduction to Mediation, Moderation, and Conditional Process Analysis: A Regression-based Approach. New York: The Guilford Press. https://doi.org/10.1111/jedm.12050.
[20] Hausman, J. 1978. Specification Tests in Econometrics. Econometrica, Vol. 46, 1251-1271.
[21] Kohpaiboon, A. 2006. Foreign Direct Investment and Technology Spillover: A Cross-industry Analysis of Thai Manufacturing. World Development, Vol. 34, No.3, 541-556.
[22] Le, H.Q., and Pomfret, R. 2011. Technology Spillovers from Foreign Direct Investment in Vietnam: Horizontal or Vertical Spillovers? Journal of the Asia Pacific Economy, Vol. 16, No. 2, 183-201. https://doi.org/10.1080/13547860.2011.564746.
[23] Li, X., Liu, X., and Parker, D. 2001. Foreign Direct Investment and Productivity Spillovers in the Chinese Manufacturing Sector. Economic System, Vol. 25, 305-321.
[24] Lin M., Kwan, Y.K. 2016. FDI technology spillovers, geography, and spatial diffusion. International Review of Economics and Finance, Vol. 43, 257-274. DOI: 10.1016/j.iref.2016.02.014.
[25] Newman, C., Rand, J., Talbot, T., and Tarp, F. 2013. Technology Transfer, Foreign Investment and Productivity Spillover: Evidence from Vietnam. Trinity College Dublin. http://ciem.org.vn/portals/1/ciem/indepthstudy/tcs12_technology_transfer_final.pdf (Access on Jan. 2019).
[26] Nguyen, N.A. et al. 2008. Foreign Direct Investment in Vietnam: Is There any Evidence of Technological Spillover Effects. Munich Personal Re PEc Archive, No. 7273, posted 20, February, 2008. https://www.researchgate.net/publication/4810215.
[27] Paitoon, W., Chayanon, P., and Nuchit, P. 2016). Spillover effects of foreign direct investment on domestic manufacturing firms in Thailand. The Singapore Economic Review, Vol. 61, No. 2, https://doi.org/10.1142/S0217590816400282.
[28] Petersen, M.A. 2009. Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches. Review of Financial Studies, Vol. 22, No.1, 435-480.
[29] Nguyen, P.L. 2008. Productivity Spillovers from Foreign Direct Investment: Evidence from Vietnamese Firm Data. https://ssrn.com/abstract=1101203 or http://dx.doi.org/10.2139/ssrn.1101203.
[30] Ramanathan, R. 2002. Introductory Econometrics with Applications. Harcourt Brace College Publishers.
[31] Sinani, E. and Meyer K. (2004),’Spillovers of technology transfer form FDI: The case of Estonia’, Journal of Comparative Economics, Vol.32, No.3,pp.455-466.DOI:10.1016/j.jce.2004.03.002.
[32] Smeets, R. 2008. Collecting the pieces of the FDI knowledge spillovers puzzle. World Bank Research Observer, Vol. 23, No.2, 107-138.
[33] Senzu, E.T. 2018. Investment attraction, competition and growth; theoretical perspective in the context of Africa. Theoretical and Practical Research in the Economic Fields, Vol. 9, No.1, 92-102.
[34] https://journals.aserspublishing.eu/tpref/article/view/2240, Date accessed: May 26, 2020.
[35] Sun, S. 2009. How does FDI Affect Domestic Firms’ exports? Industrial Evidence. The World Economy, Vol. 32, 1203-1222.
[36] Sun, S. 2011. Foreign Direct Investment and Technology Spillovers in China’s Manufacturing Sector. Chinese Economy, Vol. 44, No. 2, 25-42.
[37] https://doi.org/10.2753/1097-1475440202.
[38] Masron, T.A., Zulkafli, A.H., and Ibrahim, H. 2012. Spillover Effects of FDI within Manufacturing Sector in Malaysia. Procedia – Social and Behavioral Sciences, Vol. 58, 1204-1211. https://doi.org/10.1016/j.sbspro.2012.09.1102.
[39] Thanh Thuy, Le. 2005. Technological Spillovers from Foreign Direct Investment: The Case of Vietnam’, imeo, Graduate School of Economics, University of Tokyo. https://www.researchgate.net/publication/242318931_.
[40] VanThanh, H., and Hoang, T.P. 2010. Productivity Spillovers from Foreign Direct Investment: The Case of Vietnam. in Hahn, C.H. and D. Narjoko., eds. Causes and Consequences of Globalization in East Asia: What Do the Micro Data Analyzes Show? ERIA Research Project Report, 2009, Vol.2, 228-246.
[41] http://gso.gov.vn: the website of General Statistical Office of Vietnam, (accessed: January 22, 2019).
[42] http://ciem.org.vn: the website of Central Institute of for Economic Management, (accessed: January 26, 2019).
Published
2020-03-31
How to Cite
NGO, Ngoc Minh. Technology Spillover Effects and Policies: Evidence from Vietnam. Journal of Advanced Research in Law and Economics, [S.l.], v. 11, n. 2, p. 491 – 502, mar. 2020. ISSN 2068-696X. Available at: <https://journals.aserspublishing.eu/jarle/article/view/5118>. Date accessed: 25 feb. 2024. doi: https://doi.org/10.14505/jarle.v11.2(48).22.