Export Spillovers from FDI:Evidence from Polish firm-level data

Andrzej Cieślik (University of Warsaw)Jan Hagemejer (National Bank of Poland)

Introduction & motivation General spillovers from FDI:

MNE/FDI productivity „ideas gap” (Romer, 1993), "knowledge capital" (Markusen, 2002) World Bank (1998/9 WDR): if emerging economies are to obtain

more global knowledge they need to attract more FDI

BUT: Location-specific economies that help exports:

the geographic concentration of exports may make it feasible to construct specialized transport infrastructure, such as storage facilities or rail lines or may improve access to information about which goods are popular among foreign consumers (Aitken et al. 1997) .

When exporting MNE’s are present in a region, they may reduce information assymetries by providing experience about participation in foreing markets to domestic firms

Same for sector specific exporter-focused spillovers

Cieslik & Hagemejer, NBP & UW

Stylized facts Share of multinational firms in Poland’s exports

increased from 12% in 1992 to 61% in 2009 Frequently argued: Polish export expansion can be

attributed to activity of multinational enterprises (MNEs).

Highly statistically significant positive partial correlation between FDI and Polish bilateral trade flows.

Kolasa (2009) examines the existence of productivity spillovers from FDI using the firm-level data combined with the economy-wide input output table. Finds that local firms benefit from foreign presence in the same industry and in downstream industries.

Cieslik & Hagemejer, NBP & UW

MNE spillovers to export decision Aitken et al. (1997) were the first to study the role of

MNEs as a source of export spillovers for domestic firms in developing countries. Probit model. Both MNE and export activity in general are

important. Similar model by Greenaway et al. (2004) for UK firms

Poland: Bedi and Cieslik (2000) used aggregate data for two digit manufacturing industries from Polish regions in the 1990s. Domestic firms operating in region-industries with a higher concentration of foreign firm export activity enjoy higher export volumes.

Cieslik & Hagemejer, NBP & UW

Our contribution various sources of export enhancing effects

related to: concentration of MNE export activity, concentration of total MNE activity, overall concentration of export activity overall concentration of economic activity of exporters overall concentration of economic activity of non-exporters.

Two dimensions of spillovers: sectoral and regional

Use firm-level data: the panel covers the recent period 2000-2008, financial statement and balance sheet, employment matched with sectoral and regional data

Cieslik & Hagemejer, NBP & UW

The model

Cieslik & Hagemejer, NBP & UW

Profits (domestic market)

Cieslik & Hagemejer, NBP & UW

Profits from exporting (post-solution)

Cieslik & Hagemejer, NBP & UW

FDI spillovers Impact of FDI can be captured by

endogenizing two cost parameters β and fX. Entry of MNE/FDI:

an increase in overall productivity of domestic firms due to decreased production costs because of general FDI knowledge/productivity spillovers that decreases the unit labor requirement β,

a decrease in the cost of exporting due to information spillovers associated with export activity of multinational firms which decreases parameter fX.

Cieslik & Hagemejer, NBP & UW

Cieslik & Hagemejer, NBP & UW

Figure 1. The impact of MNE spillovers on profits of domestic firms

Π

Θ Θ*D

∏D (MNE)

- cfD

- cfX

Θ*lX

∏D(MNE)

Cieslik & Hagemejer, NBP & UW

Table I. Variables used in estimations

Variable Description

TFP Total Factor Productivity (log) – Levinshohn-Petrin

Firm's share in industry Revenues/Sector revenues

Employment Log of number of employees

Fixed capital per employee Fixed assets/number of employees

Average wage Average wage in logs

Majority state ownership A dummy variable corresponding to majority share of state owenrship

Output (sec) Log of output at sector level

Exports (sec) Log of exports at sector level

MNE output (sec) Log of MNE output at sector level

MNE exports (sec) Log of MNE exports at sector level

Non-MNE non-exporter domestic output (sec)

Log of output by non-exporting MNEs at sector level

Non-MNE exporter domestic output (sec)

Log of domestic supply market by exporting MNEs at sector level

MNE domestic output (sec) Log of MNE supply to domestic market at sector level

Non-MNE exports (sec) Log of exports by domestic firms at sector level

Output (reg) Log of output at region level

Exports (reg) Log of exports at region level

MNE output (reg) Log of MNE output at region level

MNE exports (reg) Log of MNE exports at region level

Non-MNE non-exporter domestic output (reg)

Log of output by non-exporting MNEs at revion level

Non-MNE exporter domestic output (reg)

Log of domestic supply market by exporting MNEs at region level

Non-MNE exports (reg) Log of exports by domestic firms at region level

MNE domestic output (reg) Log of MNE suply to domestic market at region level

Output by MNE's in export intensive industries (reg)

Log of MNE output in sectors with export share in revenues > 50%

Econometric strategy

Cieslik & Hagemejer, NBP & UW

Building on the theoretical framework discussed in the previous section we develop an

empirical model to study the effects of various FDI spillovers on export performance of

domestic firms. Our theoretical model can be transformed into a probit model of the

probability that a domestic firm exports as a function of firm, industry and regional

characteristics:

where are the determinants of the firms’ profit from exporting, ie. . The

firm exports if profits from doing so are positive and therefore:

  (1) (2)

VARIABLES Industry Industry/Region

     

log(tfp) 0.0459*** 0.0460***

  (0.00919) (0.00920)

Firm's share in industry 0.743** 0.742**

  (0.343) (0.342)

Employment 0.141*** 0.141***

  (0.00792) (0.00792)

Fixed capital per employee 0.0673*** 0.0673***

  (0.00424) (0.00425)

Average wage 0.0453*** 0.0452***

  (0.0124) (0.0124)

Majority state ownership -0.000958 -0.00105

  (0.0194) (0.0194)

Output (sec) -0.0440 -0.0441

  (0.0278) (0.0278)

Exports (sec) 0.0817*** 0.0820***

  (0.0209) (0.0209)

MNE output (sec) -0.00729 -0.00590

  (0.0173) (0.0173)

MNE exports (sec) -0.0112 -0.0124

  (0.0147) (0.0147)

Output (reg)   -0.0834

    (0.0613)

Exports (reg)   0.101**

    (0.0494)

MNE output (reg)   -0.00812

    (0.0316)

MNE exports (reg)   -0.00877

    (0.0340)

     

Observations 40,832 40,832

TABLE II. Probit Regression Results: Baseline Results.Robust standard errors in parentheses, estimations include time, regional and industry dummies*** p<0.01, ** p<0.05, * p<0.1

  (1) (2) (3)

VARIABLES Industry Industry/Region Industry/Region

       

log(tfp) 0.0473*** 0.0476*** 0.0476***

  (0.00923) (0.00923) (0.00922)

Firm's share in industry 0.794** 0.793** 0.791**

  (0.346) (0.345) (0.345)

Employment 0.140*** 0.140*** 0.140***

  (0.00795) (0.00794) (0.00794)

Fixed capital per employee 0.0672*** 0.0673*** 0.0673***

  (0.00426) (0.00426) (0.00426)

Average wage 0.0438*** 0.0436*** 0.0436***

  (0.0124) (0.0124) (0.0124)

Majority state ownership -0.00166 -0.00156 -0.00166

  (0.0195) (0.0195) (0.0195)

Non-MNE non-exporter domestic output (sec) -0.0678*** -0.0678*** -0.0672***

  (0.00846) (0.00846) (0.00846)

Non-MNE exporter domestic output (sec) 0.0350*** 0.0352*** 0.0355***

  (0.0112) (0.0112) (0.0112)

Non-MNE exports (sec) 0.0190** 0.0190** 0.0192**

  (0.00899) (0.00899) (0.00899)

MNE output (sec) -0.0124 -0.0112  

  (0.0131) (0.0131)  

MNE exports (sec) 0.0253** 0.0245** 0.0224***

  (0.0102) (0.0102) (0.00790)

Non-MNE non-exporter domestic output (reg)   -0.0262 -0.0270

    (0.0183) (0.0185)

Non-MNE exporter domestic output (reg)   -0.00869 -0.00966

    (0.0217) (0.0221)

Non-MNE exports (reg)   0.0369** 0.0389**

    (0.0174) (0.0175)

MNE output (reg)   -0.0279  

    (0.0261)  

MNE exports (reg)   0.0406* 0.0321

    (0.0235) (0.0199)

MNE domestic output (sec)     -0.00897

      (0.00796)

MNE domestic output (reg)     -0.0158

      (0.0157)

       

Observations 40,673 40,673 40,673

TABLE III. Probit Regression Results: Exporters vs. Non-exportersRobust standard errors in parentheses, estimations include time, regional and industry dummies*** p<0.01, ** p<0.05, * p<0.1

  (1) (3) (4) (5)

VARIABLES Regression 1 Regression 3 Regression 4 Regression 5

         

log(tfp) 0.0480*** 0.0352*** 0.0146 -0.00887*

  (0.00922) (0.0103) (0.0106) (0.00528)

Firm's share in industry 0.785** 0.622** 0.393* -0.109

  (0.344) (0.275) (0.216) (0.119)

Employment 0.140*** 0.131*** 0.127*** 0.0356***

  (0.00796) (0.00859) (0.00861) (0.00424)

Fixed capital per employee 0.0670*** 0.0545*** 0.0337*** -0.0138***

  (0.00426) (0.00469) (0.00471) (0.00224)

Average wage 0.0427*** 0.0389*** 0.0453*** 0.0226***

  (0.0124) (0.0141) (0.0144) (0.00767)

Majority state ownership -0.00284 -0.00528 -0.0130 -0.0284***

  (0.0195) (0.0214) (0.0214) (0.00847)

Non-MNE non-exporter domestic output (sec) -0.0671***(0.00849)

-0.106***(0.00908)

-0.0694***(0.00814)

-0.0112***(0.00408)

         

Non-MNE exporter domestic output (sec) 0.0356***(0.0112)

0.0657***(0.0133)

-0.00289(0.0132)

-0.0446***(0.00700)

         

Non-MNE exports (sec) 0.0203** 0.0357*** 0.0716*** 0.0560***

  (0.00901) (0.0105) (0.0104) (0.00565)

MNE domestic output (sec) -0.0101 -0.00808 0.000120 -0.00289

  (0.00798) (0.00833) (0.00836) (0.00420)

MNE exports (sec) 0.0235*** 0.0319*** 0.0223*** 0.0150***

  (0.00796) (0.00842) (0.00846) (0.00479)

Non-MNE non-exporter domestic output (reg) -0.0220(0.0186)

-0.0248(0.0203)

-0.0213(0.0198)

0.00174(0.00904)

         

Non-MNE exporter domestic output (reg) -0.00851(0.0222)

0.0152(0.0238)

-0.00506(0.0230)

-0.0111(0.0110)

         

Non-MNE exports (reg) 0.0394** 0.0298 0.0513*** 0.0214**

  (0.0179) (0.0196) (0.0191) (0.00965)

MNE non-exporter domestic output (reg) -0.000107(0.00396)

0.000889(0.00424)

0.00388(0.00417)

-0.00152(0.00206)

         

MNE exporter domestic output (reg) -0.0122 -0.0298** -0.0290** 0.00190

  (0.0137) (0.0148) (0.0147) (0.00703)

MNE exports (reg) 0.0333 0.0577** 0.0358 -0.000161

  (0.0208) (0.0229) (0.0222) (0.0109)

         

         

Observations 40,240 40,256 40,256 39,851

TABLE IV. Probit regression results: Exporting vs. Non-exporting MNEs.Robust standard errors in parentheses, estimations include time, regional and industry dummies*** p<0.01, ** p<0.05, * p<0.1

Summary and Conclusions

we studied the impact of FDI on export activity of domestic firms in Poland using the Polish firm level data for 2000-2008

we distinguished between spillovers related to the concentration of MNE export activity and the spillovers related to the concentration of MNE total economic activity at the sectoral and regional levels, having controlled for the overall concentration of economic activity, the overall concentration of export activity as well as a number of other firm, industry and regional characteristics

the measure of sectoral concentration of MNE export activity displayed a positive sign and were statistically significant

only one channel (MNE export activity at the sectoral level) of knowledge spillovers from MNEs is important for export activity of domestic firms in Poland

MNE output concentration was not statistically significant neither at the sectoral nor the regional levels (no positive general productivity spillovers)

Cieslik & Hagemejer, NBP & UW

Summary and Conclusions