| This study examines how foreign direct investment (FDI) impacted the productivity of firms in Thailand's manufacturing industry from 2001 to 2003. The focus is on two specific questions: (i) is there is an association between a foreign presence and increased productivity of firms in Thailand's manufacturing industry and (ii) is the magnitude of the technology spillover effect related to the size of the firm, export orientation, and technology level? A large sample of firm-level data obtained from the Office of Industrial Economics (OIE), Ministry of Industry, Thailand has been used. The model in this study is designed to include multiple channels of learning.; The results show evidence of a positive effect of spillover on firms in Thailand's manufacturing industry. For the domestic firms, the spillover effect depends on the size of the firm, export orientation, and technology level. In particular, the results suggest that small, domestic-oriented, and low-technology domestic firms are the groups that benefit most from the presence of foreign firms. There does tend to be some negative spillover effect, however, in the large, export-oriented and high-technology domestic firms.; Domestic firms with the capacities to access modern technology through other channels such as economies of scale, trade orientation, and foreign ownership in the firms may not rely much on the spillover from FDI. On the other hand, domestic firms with lower performance can benefit from the presence of foreign firms in the domestic market.; The policy implication and recommendation from this study is that the government should continue providing incentives to encourage FDI with specific focus. The government should provide support to help the small domestic firms learn from foreign firms. Both investment and trade policies should be used to help the domestic firms gain access to modern technology. For the high-technology industries, there should also be policies that aim at improving the core capabilities of the domestic firms. These would include areas such as increasing the learning capability and skill of the domestic employee in order to help narrow the technology gap and allow the domestic firms to benefit from technology spillover from FDI. |
