Mariana Spatareanu

Tough Love: Do Czech Suppliers Learn from Their Relationships with Multinationals?

Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. While the empirical studies have cast doubt on the existence of horizontal spillovers from FDI in developing countries, several recent papers have confirmed the presence of vertical spillovers, which take place through contacts between foreign affiliates and their local suppliers. However, the existing studies rely on industry-level proxies for vertical spillovers rather than information on actual relationships between local companies and multinationals. This study goes one step further by employing a unique dataset from the Czech Republic, which allows us to identify local firms supplying multinationals operating in the country. The data suggest that suppliers are different from other firms. They are larger, have a higher capital-labor ratio, pay higher wages and exhibit a higher productivity level. The evidence is suggestive of both high productivity firms having a higher probability of supplying multinationals as well as suppliers learning from their relationships with multinationals.

Liquidity Constraints and Firms' Linkages with Multinationals

Using a unique data set from the Czech Republic for 1994-2003, this study examines the relationship between a firms liquidity constraints and its supply linkages with multinational corporations (MNCs). The empirical analysis indicates that Czech firms supplying MNCs are less credit constrained than non-suppliers. A closer inspection of the timing of the effect, however, suggests that this result is due to less constrained firms self-selecting into becoming MNC suppliers rather than the benefits derived from the supplying relationship. As recent literature finds that productivity spillovers from foreign direct investment (FDI) are most likely to take place through contacts between MNCs and their local suppliers, our finding suggests that well-developed financial markets may be needed in order to take full advantage of the benefits associated with FDI inflows.

Searching for Pollution Havens The Impact of Environmental Regulations on Foreign Direct Investment

This study takes a fresh look at the regulatory determinants of foreign direct investment (FDI) by asking whether the stringency and sustainability of environmental regulations affect FDI flows across 25 Western and Eastern European countries. Unlike the earlier literature, which considered only host country characteristics, this article focuses on the difference in the regulatory environments in home and host economies. The data suggest that more stringent environmental regulations in the investors country relative to those in the potential host country are positively correlated with the probability of investment as well as with the volume of FDI. The results also show that firms in industries with higher abatement costs tend to invest more abroad.

Trade openness and income – a re-examination

This study uses a new, innovative measure of trade protection and finds that less trade protection is associated with higher income per capita, using data from 131 developed and developing countries.

Foreign direct investment and labour rights: a panel analysis of bilateral FDI flows

The article analyses the impact of fundamental labour rights on bilateral Foreign Direct Investment (FDI) flows to 82 developing countries. The results indicate that investments by multinationals are significantly higher in countries that adhere to labour rights, thereby refuting the hypothesis that repression of these rights fosters FDI.

FDI Spillovers and the Timing of Foreign Entry

This study analyzes the dynamic effect of FDI on local firms’ productivity by relaxing the standard implicit assumption that technological spillovers are immediate and permanent. We find that the entry of majority foreign owned firms has a short run negative effect on the productivity of local competitors, which is more than offset by a longer run positive effect. The entry of minority foreign owned firms has an immediate, though short-lived, positive effect on local suppliers through backward linkages. The entry of majority foreign owned firms also improves the productivity of local suppliers, but the effect materializes later and lasts longer.

The cost of capital, finance and high-tech investment

Investment is the most volatile component of aggregate demand and it is often considered central to business cycles fluctuations. The responsiveness of business investment to changes in its price is thus crucial to our understanding of economic activity. In spite of the key role played by the user cost of capital in economic analysis, there is little empirical support for the existence of substantial user cost elasticity. However, most of the evidence to date is based on aggregate user cost data, which may have introduced downward biases in the estimated user cost. This paper contributes to the literature by constructing a disaggregated, industry‐specific micro user cost variable and focusing on a special class of firms – the high‐tech firms. To provide a benchmark for the results, the user cost estimates for the high‐tech sector are compared with those for the rest of the manufacturing sector. The results suggest that there is little response of investment to variations in its user cost. The findings also suggest that high‐tech firms’ investment behavior is not, after all, that different from the rest of the manufacturing sector.

Foreign direct investment spillovers and firms' access to credit

Using a unique data set from the Czech Republic for 1994–2003, this study examines the relationship between technological spillovers from foreign direct investment (FDI) and firms’ access to external finance. The empirical analysis indicates that overall, Czech firms benefit little from technological spillovers from FDI. However, a closer look at the financing of domestic firms suggests that firms that have access to external finance enjoy larger benefits from the presence of foreign firms in their own industry or in downstream industries, through increased productivity. The results highlight the importance of financial-sector development and access to external financing to increasing the productivity and competitiveness of domestic firms through technological spillovers from FDI. Our finding suggests that well-developed financial markets may be needed in order to take full advantage of the benefits associated with FDI inflows.

Bank distress and firms’ investment during the Great Recession - evidence from Ireland

ABSTRACT This article investigates the impact of bank distress on firms’ performance using unique data during the Great Recession for Ireland. The results show that bank distress, measured as banks’ credit default swap spreads (CDS), has negatively and statistically significantly affected firms’ investment expenditures. Interestingly, firms with access to alternative sources of external finance are not impacted by bank distress. The results are robust to accounting for external finance dependence, demand and trade sensitivities, which affect firm performance and the demand for credit.

Investment climate, foreign networks and exporting – evidence from Africa

This paper investigates the impact of investment climate variables and foreign networks on the exporting decisions of African firms. We use data from the World Bank Investment Climate Surveys for over 7000 firms in 24 Sub-Saharan African countries. The results highlight the crucial role of the access to, and the quality of, investment climate characteristics – infrastructure, external finance and telecommunications for Sub-Saharan African firms’ exporting propensities. Our results show that improving the investment climate to the level of best performers in the sample will considerably increase the propensity of domestic firms to export. The paper also finds that foreign networks have a significantly positive impact on firms’ export propensities.