DP1365 Multinational Corporations and Spillovers

Author(s): Magnus Blomström, Ari Kokko
Publication Date: April 1996
Keyword(s): Foreign Investment, Multinational Corporations, Spillovers, Technology Transfer
JEL(s): F23
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1365

This paper examines spillover effects of the activities of multinational firms (MNCs). Such effects are most likely to be found in host countries, where the operations of foreign multinationals may influence local firms in the MNC?s own industry as well as firms in other industries. There is no comprehensive evidence on the exact nature or magnitude of these effects, however, although it is suggested that host country spillovers vary systematically between countries and industries. In particular, the positive effects of foreign investment are likely to increase with the level of local capability and competition. The spillovers to the home countries of MNCs are often more difficult to identify, for various reasons. Earlier studies suggest that the effects are generally positive, but the increasing international division of labour within multinationals complicates the analysis. The impact on the home country is likely to depend on what activities these firms concentrate on at home.