The impacts of host-country characteristics on cross-industry spillovers from multinational firms

This thesis detects, both theoretically and empirically, host-country and industry characteristics that influence the volume of cross-industry spillovers originating from multinationals. Previous literature mainly focuses on existences of horizontal spillovers from multinationals to host producers in the same industry, but ignore spillovers taken place in a vertical structure.; Chapter 1 constructs a model to explore host-country features involving in the vertical transfer process from multinationals to host suppliers in upstream industries. The model indicates that vertical transfer enhances suppliers' efficiencies and lowers multinationals' production costs. At the same time, it intensifies competitions for multinationals by making more efficient intermediate inputs available to host competitors. Multinationals balance these two opposing effects and endogenize the volume of vertical transfer to local suppliers. The optimal vertical transfer decision implies that when host competitors produce at a high efficiency level, narrowing the technological lead of multinationals will decrease the volume of vertical transfer to local suppliers; while it will increase the transfer when host competitors produce at a low efficiency level. This non-monotonic relationship between the technological lead of multinationals in the final good industry and the volume of technology transfer received by local upstream supply industries is a guide for the next empirical work.; Chapter 2 examines empirically impacts of host-country characteristics on the volume of cross-industry spillovers. It applies US outflow FDI in 26 host countries and 6 industries from 1984 to 1998. Through cross-country comparisons, estimation results confirm the inverted U-shape relationship between the technological lead of US multinationals in an industry and productivity growth of local upstream/downstream industries brought about by foreign presences. The results also demonstrate strengths of linkages built by US multinationals in different industries with host related industries.; Chapter 3 deviates from the first two chapters and focuses on the underlying heterogeneity of industries' reacts to changes in the basic determinants of knowledge capital model. It concludes that horizontal, market-seeking incentives are important in directly locating food production facilities but the total effects of income differences, endowments, and trade barriers is to shift production toward countries that are more dissimilar with the US than others.