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Impact of Foreign Direct Investment on Local Firm Performance: Insights from Common Local Inputs Suppliers

This study examines the relationship between Foreign Direct Investment (FDI) and the performance of domestic firms when they share common local input suppliers. Analyzing data from Bangladeshi garment manufacturers, it shows positive effects on various performance indicators in the presence of FDI served by domestic intermediate goods producers. The paper's strengths lie in its detailed dataset, rigorous econometrics, and consistent results across different performance measures. Recommendations are made for enhancing FDI's impact on domestic firms not involved in exports, with considerations for future research avenues.

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Impact of Foreign Direct Investment on Local Firm Performance: Insights from Common Local Inputs Suppliers

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  1. Local Intermediate Inputs, Foreign Direct Investment and the Performance of Domestic Firms: When Firms Share common Local Input Suppliersby H.L. Kee Comments by Michael Moore (GWU and IIEP)

  2. Foreign markets TFP Sales per worker Output per worker Domestic Producers

  3. Foreign markets TFP Sales per worker Output per worker Domestic Producers Imported intermediate goods

  4. Foreign markets TFP Sales per worker Output per worker Domestic Producers FDI Imported intermediate goods

  5. Foreign markets TFP Sales per worker Output per worker Domestic Producersi FDIi “siblings” in sector i Imported intermediate goods Domestic intermediate good producers

  6. “Everything But Arms” EU final market Non-EU final market Domestic Producers FDI “siblings” in sector i Domestic intermediate good producers of ai

  7. Data and Results • Universe of Bangladeshi garment manufacturers (1999-2003) • Positive effects on domestic firm performance (for many measures) with FDI presence served by domestic intermediate good producers

  8. Strengths of paper • Rich and detailed data set • Very careful and appropriate econometrics • Wide range of different specification with consistent results for various measures of firm performance • True for domestic firms that do not export to EU

  9. Suggestions FDIi ai Domestici Current

  10. Suggestions For i k FDIi ai ak Domestick

  11. Suggestions FDIi ai Domestici not involved in exports

  12. Unfair “complaint” • Careful empirics  Narrow lesson • FDI in other countries? • FDI in other Bangladeshi industries?

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