ANALYSIS OF PERFORMANCE OF FOREIGN-INVESTED FIRMS AND THE IMPACTS ON DOMESTIC FIRMS AND INDUSTRIES IN THAILAND

Abstract

Many empirical researches have been dedicated to study the economic impacts of FDI; however, the consensus on whether FDI can accelerate the economic growth is still ambiguous. This dissertation examines another aspect of FDI’s impact, the spillover effect on local plants. With the 2007’s industrial census, we use micro-level data to examine the effect of FDI on productivity and export performance of locally-operated plants. We first design estimation models to investigate productivity and export performance differentials between foreign-invested and locally-operated plants. Next, we examine the effects of foreign presence on productivity and export performance of locally-operated plants, using Translog production fucntions with both two and four factors of production. The results of our study find that the differences in export performances between foreign and locally operated plants are more convincing than their productivity differentials. There is limited evidence that the foriegn presences in local industries could positively influence the export performances of the locally-operated plants. The study of FDI externalities on locally-operated plants by sector shows that the effects are significant in only a few industries. However, we find that foreign presence in downstream industries has a positive effect not only on the productivity of local plants but also on their export performances in many industries. Our findings reveal that the externalities from the presences of foreign firms on productivity and export performance of locally operated plants (horizontal spillover effect) are detected in only selected industries. In other words, both performance differentials and spillovers effects vary across industries.