Doan Thi Thanh Ha: This paper aims to examine vertical and horizontal FDI spillover effects on domestic firms, utilizing Malaysian firm-level data covering the years 2000 to 2005. The paper follows the standard literature to estimate a firm's TFP as a function of horizontal spillover, backward and forward spillovers, and some other industry and local firm characteristics, including firm size, firm age, and export status. Market orientation of foreign firms and absorptive capacity of domestic firms are also controlled for.
Main findings are two-fold. First, there is no supporting evidence of horizontal spillovers. Second, vertical spillovers are negative but also not significant. The results suggest the low absorptive capacity of local firms to enjoy benefit from FDI.
The paper includes a lengthy presentation on the theoretical mechanism through which FDI exerts impact on domestic firm's productivity. The introduction, for example, mentions the potential benefits from vertical spillover through technology transfer...