Imports, FDI Spillovers and Firm Performance

Abstract

This paper investigates the productivity effects of the number of inputs a firm chooses to import. It also analyses how accounting for the productivity gains from imported inputs affects foreign direct investment (FDI) spillover. The identification of the gains from imports comes from comparing productivity differences among firms that use different numbers of imported inputs, all else being equal. Using a firm-level dataset, I find a positive gain from imported inputs for both domestic and foreign-owned firms with the magnitude being larger for the latter. Moreover, I find a positive horizontal FDI spillover; whereas, the results for backward and forward spillovers seem mixed. Finally, I find little evidence suggesting accounting for the productivity effects of imported inputs affects gains from foreign presence. This indicates that productivity gains from imported inputs and FDI spillover are different and unrelated.