How Domestic Firms Absorb Spillovers: A Routine-Based Model of Absorptive Capacity View

2018 ◽  
Vol 14 (3) ◽  
pp. 543-576 ◽  
Author(s):  
Cheng-Hua Tzeng
Keyword(s):  
Absorptive Capacity ◽  
Employee Turnover ◽  
Multinational Enterprises ◽  
Business Strategies ◽  
Domestic Firm ◽  
Productivity Change ◽  
Unexpected Finding ◽  
Domestic Firms ◽  
Technology Gaps ◽  
Complementary Assets

ABSTRACTExtant spillover literature explains domestic firms' productivity change mainly by the presence and attributes of foreign direct investment. In contrary, this paper, by adopting a routine-based model of absorptive capacity, intends to explore how domestic firms absorb spillovers over time. Based on a qualitative study of a domestic firm in China's silicone adhesive industry, the findings show that unbounded by geographical constraints, domestic firms enact their external absorptive capacity routines to actively search for spillovers from multinational enterprises (MNEs) at both national and international levels. Moreover, rather than searching for what is available, domestic firms are selective for spillovers that are coherent with their business strategies. The most unexpected finding is that domestic firms diligently acquire spillovers from MNEs and from local competitors in combination. Spillovers acquired from local competitors are used to increase the inferential accuracy of spillovers acquired from MNEs about strategic successes. Further, instead of absorbing spillovers from MNEs which pose moderate technology gaps, domestic firms target at MNEs which exhibit wider technology gaps, and undertake organizational learning and develop complementary assets to enhance their internal absorptive capacity routines. Socially enabling mechanisms are found to facilitate domestic firms' absorption of spillovers by employee turnover.

scholarly journals How Domestic Firms Benefit from the Presence of Multinational Enterprises: Evidence from Indonesia and Philippines

Economies ◽  
2019 ◽  
Vol 7 (3) ◽  
pp. 94
Author(s):  
Joshua Akinlolu Olayinka ◽  
Sirinuch Loykulnanta
Keyword(s):  
Panel Data ◽  
Absorptive Capacity ◽  
Multinational Enterprises ◽  
Panel Data Analysis ◽  
Production Model ◽  
Technology Spillover ◽  
Estimation Model ◽  
Worker Mobility ◽  
Domestic Firms ◽  
The Impact

Incentives are provided to attract multinational enterprises (MNEs) to host countries, with the expectation that their technology will spread to domestic firms. The purpose of this study is to examine how domestic firms benefit from the spillover of technology from MNEs. Using balanced panel data obtained from the World Bank Enterprise Survey, this study examined the impact of technology spillover through three channels: demonstration, competition, and worker mobility on productivity of domestic firms in Indonesia and Philippines. This study also explored the importance of domestic firms’ absorptive capacity in capturing benefits from the three spillover channels. The Cobb–Douglas production model was used as the basis for the estimation model. A fixed-effect model for panel data analysis was used to analyze the data. The empirical outcome of this study revealed that worker mobility is the most viable channel of spillover in the two countries. It also showed that firms with high absorptive capacity were found to benefit from all the channels of spillover in both countries, while the firms with low absorptive capacity benefit differently in the two countries. Thus, this study validates the need for domestic firms to develop absorptive capacity in order to benefit from the technology spillover from MNEs.

scholarly journals Wage gains from foreign ownership: evidence from linked employer–employee data

2021 ◽  
Vol 55 (1) ◽  
Author(s):  
János Köllő ◽  
István Boza ◽  
László Balázsi
Keyword(s):  
Multinational Enterprises ◽  
Spillover Effects ◽  
Local Economy ◽  
Domestic Firm ◽  
Skilled Workers ◽  
Domestic Firms ◽  
Foreign Acquisition ◽  
Worker Turnover ◽  
Hungarian Population ◽  
Employee Data

AbstractWe compare the wages of skilled workers in multinational enterprises (MNEs) versus domestic firms, the earnings of domestic firm workers with past, future and no MNE experience, and estimate how the presence of ex-MNE peers affects the wages of domestic firm employees. The analysis relies on monthly panel data covering half of the Hungarian population and their employers in 2003–2011. We identify the returns to MNE experience from changes of ownership, wages paid by new firms of different ownership, and the movement of workers between enterprises. We find high contemporaneous and lagged returns to MNE experience and significant spillover effects. Foreign acquisition has a moderate wage impact, but there is a wide gap between new MNEs and domestic firms. The findings, taken together, suggest that MNE employees accumulate partly transferable knowledge, valued in the high-wage segment of the local economy that is connected with the MNEs via worker turnover.

Spillover effects of marketing expertise on market performance of domestic firms and MNEs in emerging markets

2016 ◽  
Vol 54 (1) ◽  
pp. 107-129 ◽  
Author(s):  
Qiang (Steven) Lu ◽  
Chinmay Pattnaik ◽  
Mengze Shi
Keyword(s):  
Multinational Enterprises ◽  
Market Performance ◽  
Spillover Effects ◽  
Loyalty Programs ◽  
Domestic Firm ◽  
Gasoline Market ◽  
Loyalty Program ◽  
Content Type ◽  
Domestic Firms ◽  
The Impact

Purpose – The purpose of this paper is to study the spillover effects of marketing expertise on the market performance of domestic firms and multinational enterprises (MNEs). Specifically, this study examines how the adoption of frequency loyalty programs by a domestic firm following an MNE affects the competitive dynamics and the market performance of both firms in a Chinese retail gasoline market. Design/methodology/approach – This study is based on empirical data that were obtained from a quasi-field experiment in which the MNE entered the market with a frequency loyalty program and the domestic firm later responded with a similar loyalty program. The authors measured the impact of the adoption of a frequency loyalty program by the domestic firm on the market performance of both the domestic firm and the MNE. Findings – The authors find that the domestic firm’s adoption of a similar loyalty program significantly increased its market share in the regular gasoline market. The domestic firm’s adoption of a loyalty program also increased the market performance of the MNE in the premium gasoline market. Originality/value – This study explicitly demonstrates the spillover benefits through demonstration effects and provides empirical evidence on specific spillover benefits to domestic firms and MNEs based on their competencies in distinct market segments where they compete.

Building (or not building) dynamic capabilities: the case of Italian subsidiaries in China and India

2018 ◽  
Vol 26 (4) ◽  
pp. 337-360 ◽  
Author(s):  
Giuseppe Tattara
Keyword(s):  
Value Chain ◽  
Multinational Enterprises ◽  
Dynamic Capabilities ◽  
Case Study Research ◽  
Business Strategies ◽  
Future Research ◽  
Capability Development ◽  
Regional Effect ◽  
Content Type ◽  
Capability Building

Purpose The purpose of this paper is to examine the process of capability building at subsidiary level and the forces preventing such process. The paper discusses and tests three propositions governing this process. Design/methodology/approach This research is based on multiple case studies. A case study research is most useful when addressing issues about which little prior theory has been developed or empirical evidence collected. Findings Subsidiaries in Asia operate in a way substantially different from those in the West. Specifically what ways do market specificities in Asian economies serve to either inhibit or positively encourage the development of a subsidiary? What are the circumstances which could induce subsidiaries to outsource production? Research limitations/implications Future research should explore the regional effect on MNE subsidiary types and different flexibilities exhibited in the value chain. What are the specific aspects (macro and micro) that explain variations of business strategies at subsidiary levelboth over time and between countries? Practical implications Multinational enterprises (MNEs) should be aware of the strong potential for capability development at the subsidiary level. This increased awareness ought to induce consideration in MNEs about how best to encourage such know capability development and how to leverage these capabilities for a better MNE performance. Social implications Managers who knew the host country languages and culture, and have outward-looking attitudes, are in advantageous positions to learn about new opportunities. Originality/value The paper offers empirical insights into the state and drivers of subsidiary performance in Asia. Specifically it shows how neglect of external conditions can act to open people’s eyes and foster a capability-building process within subsidiaries.

Multi-Level Governance: Explaining the “climate-focused” behavior of Chinese exporting companies

2018 ◽  
Vol 34 (2) ◽  
pp. 165-188 ◽  
Author(s):  
Yitian Huang
Keyword(s):  
Multinational Enterprises ◽  
National Level ◽  
Developed Countries ◽  
International Norms ◽  
Business Strategies ◽  
Chinese Government ◽  
Governmental Organizations ◽  
Nation States ◽  
Non Governmental Organizations ◽  
Multi Level

While being increasingly aware of the importance of adopting climate-friendly business strategies, Chinese exporting companies have been active in taking “climate-related” actions but moderate in taking “climate-focused” actions. This article presents a preliminary attempt to apply Multi-Level Governance theories to explain the behavior of Chinese exporting companies toward climate change mitigation. It argues that the convergence of state-centered climate politics and market-oriented climate governance, which has a multi-level feature, has shaped the “climate-focused” behavior of Chinese exporting companies. Specifically, nation-states, multinational enterprises, and non-governmental organizations have contributed in the following ways: (1) at the global level, nation-states co-established and interpreted international norms, which generally justify the stance of the Chinese government, have been an indirect source of influence; (2) at the national level, the Chinese government has been the most influential actor, which has put emphasis on energy-saving when interpreting and operationalizing international norms; (3) at the industrial level, multinational enterprises and international non-governmental organizations have been influential contributors by playing a proactive role in launching and running low-carbon initiatives; and (4) transnational public–private partnerships launched in China and some developed countries have offered limited momentum.

scholarly journals Do Multinational Enterprises Push up the Wages of Domestic Firms in the Italian Manufacturing Sector?

2014 ◽  
Vol 83 (3) ◽  
pp. 346-378 ◽  
Author(s):  
Rosanna Pittiglio ◽  
Filippo Reganati ◽  
Edgardo Sica
Keyword(s):  
Multinational Enterprises ◽  
Manufacturing Sector ◽  
Domestic Firms ◽  
Push Up

scholarly journals Does Chinese Inward Foreign Direct Investment Improve the Productivity of Domestic Firms? Horizontal Linkages and Absorptive Capacities: Firm-Level Evidence from Ethiopia

2020 ◽  
Vol 12 (7) ◽  
pp. 3023 ◽  
Author(s):  
Engidaw Sisay Negash ◽  
Wenjie Zhu ◽  
Yangyang Lu ◽  
Zhikai Wang
Keyword(s):  
Sustainable Development ◽  
Foreign Direct Investment ◽  
Absorptive Capacity ◽  
Direct Investment ◽  
Efficient Technology ◽  
Chinese Firms ◽  
Firm Level ◽  
Domestic Firms ◽  
Positive Spillovers ◽  
Local Firms

Publicized as a global call for action in 2015, the United Nations General Assembly (UNGA) has forwarded an agenda of resolutions to achieve the goals of sustainable development by 2030 (SDGs). Due to the specific challenges of funding gaps and the lack of advanced technology, the majority of Sub-Saharan African (SSA) countries are still behind the standard of world development. Since foreign direct investment (FDI) has the potential to bring much-needed capital and efficient technology, FDI has often been considered as a vigorous source of development, even for sustainable development for under-developing economies experienced today. Conspicuously, Chinese outward FDI (OFDI) into SSA has seen a strong upward trend in the 21st Century, after China proclaimed its “go global” strategy. Ethiopia is one of the favored destinations of the trend of Chinese OFDI, which also substantially continues through the SSA region. The hosting economy of Ethiopia expected that Chinese inward FDI comes with capital, efficient technology, and knowledge to contribute innovations through directly improving productivity and competitiveness via technological diffusion to domestic industries and eventually for sustainable development. Against this backdrop, this study utilizes firm-level panel datasets from Ethiopia to address the following couple of research questions. The first question is: are there any productivity differences between the establishment of Chinese-affiliated and domestic firms in the manufacturing industry in Ethiopia? The second is, does the presence of Chinese-affiliated firms provide productivity spillovers for domestic firms in the same industry level for socio-economic development? The investigation was carried out using 2554 manufacturing firm census data, from which 15.04% were Chinese firms operating in Ethiopia. We used the ordinary least squares (OLS) and generalized-method-of-moments (GMM) two-step approaches for estimations. Our findings revealed that, generally, Chinese firms were more productive than local firms and their presence can bring positive potential productivity spillover effects for domestic firms. Specifically, we found that local firms have gained significant positive spillovers when they had a high absorptive capacity, whereas low-absorptive capacity firms suffered negative spillovers. We also found that non-exporting domestic firms experience significant positive spillovers from the presence of Chinese firms.

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