Local sourcing in developing countries: The role of foreign direct investments and global value chains

Vito Amendolagine; Andrea F. Presbitero; Roberta Rabellotti; Marco Sanfilippo

doi:10.1016/j.worlddev.2018.08.010

Local sourcing in developing countries: The role of foreign direct investments and global value chains

Vito Amendolagine, Andrea F. Presbitero, Roberta Rabellotti^*, Marco Sanfilippo

^*Corresponding author for this work

Cluster for Research on Innovation and Development

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Abstract

The local sourcing of intermediate products is one the main channels for foreign direct investment (FDI) spillovers. This paper investigates whether and how participation and positioning in the global value chains (GVCs) of host countries is associated to local sourcing by foreign investors. Matching two firm-level data sets on 19 Sub-Saharan African countries and Vietnam to country-sector level measures of GVC involvement, we find that more intense GVC participation and upstream specialization are associated to a higher share of inputs sourced locally by foreign investors. These effects are larger in countries with stronger rule of law and better education.

Original language	English
Journal	World Development
Volume	113
Pages (from-to)	73-88
Number of pages	16
ISSN	0305-750X
DOIs	https://doi.org/10.1016/j.worlddev.2018.08.010
Publication status	Published - 1 Jan 2019

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AB - The local sourcing of intermediate products is one the main channels for foreign direct investment (FDI) spillovers. This paper investigates whether and how participation and positioning in the global value chains (GVCs) of host countries is associated to local sourcing by foreign investors. Matching two firm-level data sets on 19 Sub-Saharan African countries and Vietnam to country-sector level measures of GVC involvement, we find that more intense GVC participation and upstream specialization are associated to a higher share of inputs sourced locally by foreign investors. These effects are larger in countries with stronger rule of law and better education.

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Local sourcing in developing countries: The role of foreign direct investments and global value chains

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