Foreign direct investment and export spillovers: Evidence from Vietnam

The existing IB literature suggests that the presence of foreign firms in a country can benefit domestic firms through the formation of inter-firm linkages. These linkages can take various forms. By making use of firm level data from Vietnam's manufacturing sector, this paper examines the impact of horizontal and vertical (backward and forward) linkages between domestic and foreign firms on (i) the decision of domestic firms to export and (ii) the export share of domestic firms. This paper considers only transactional linkages. The empirical analysis is based on Heckman's two-step estimator in selection models. It is shown that the presence of foreign firms in Vietnam, through horizontal and forward linkages, significantly affects the decision of domestic firms to export as well as their export share. This result continues to hold when we take into account factors such as the (a) level of technology of domestic firms, (b) ownership structure of domestic firms, (c) orientation of foreign firms and (d) geographical proximity to foreign firms.

Research highlights▶ Export spillovers experienced by Vietnamese firms can be attributed to horizontal and forward linkages with foreign firms. ▶ Backward linkages have contributed to a decrease in export activities of Vietnamese firms. ▶ Horizontal linkages have benefited both the low and medium/high technology domestic firms. ▶ Forward (horizontal) linkages have mainly benefited the private (state owned) firms. ▶ An increase in geographical concentration of foreign firms in a region enhances the export performance of domestic firms located in the same region.