Krisztina Orbán, Monash University - Upstream Responses to Foreign Firm Expansion

Title: Where the Giants Go, Do Locals Grow? Upstream Responses to Foreign Firm Expansion

Abstract: This paper examines how upstream production responds to the expansion of foreign downstream firms within the same province in Vietnam. Using detailed firm-product-level panel data from 2010 to 2017 and building a unique, detailed input-output linkages dataset at the 8 digit level, the analysis exploits variation in local input demand driven by foreign output growth. Controlling for the province's comparative advantages, province-year shocks and product-level shocks, the results show that input production rises significantly in response to an increase in output by foreign downstream firms, with the expansion accompanied by new firm entry into relevant upstream sectors. Notably, while foreign owned upstream firms expand in their input production in response to the input demand shock, domestic owned firms' production of the relevant input contracts, revealing new dynamics in the heterogeneity of supply-side adjustments to FDI-induced demand shocks.

Presenter:  Krisztina  Orbán, Monash University

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