DP9324 Suppliers of multinationals and the forced linkage effect: Evidence from firm level data

Author(s): Olivier Godart, Holger Görg
Publication Date: January 2013
Keyword(s): backward linkages, forced linkage, multinational customers, productivity spillovers, suppliers
JEL(s): F23, O12
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9324

Using information on more than 1000 firms in a number of emerging countries, we find quantitative evidence that suppliers of multinationals that are pressured by their customers to reduce production costs or develop new products have higher productivity growth than other firms, including other host country suppliers of multinationals. These findings provide first empirical support for a ?forced linkage effect? from supplying multinational companies. Our findings hold controlling for other factors within and outside the supplier- customer relationship and when endogeneity concerns are taken into consideration.