Authors: Javorcik, Beata S.¹; Spatareanu, Mariana²

Source: World Bank Economic Review, Volume 23, Number 2, 3 June 2009 , pp. 323-346(24)

Publisher: Oxford University Press

Abstract:

Using a unique data set on the Czech Republic for 19942003, this article examines the relationship between a firm's liquidity constraints and its supply linkages with multinational corporations (MNCs). The empirical analysis indicates that Czech firms supplying multinationals are less credit constrained than are nonsuppliers. Closer inspection of the timing of the effect, however, suggests that the result is due to self-selection of less constrained firms into supplying multinationals rather than to the benefits derived from the supplying relationship. As the recent literature finds that productivity spillovers from foreign direct investment (FDI) are most likely to take place through contacts between MNCs and their local suppliers, this finding suggests that well-developed financial markets may be needed to take full advantage of the benefits associated with FDI inflows.

Keywords: F21; F23; F36

Document Type: Research article

DOI: http://dx.doi.org/10.1093/wber/lhp002

Affiliations: 1: Beata S. Javorcik (corresponding author) is a reader in economics, University of Oxford, and a research affiliate at the Centre for Economic Policy Research. 2: Mariana Spatareanu is an assistant professor of economics at Rutgers University; her address is, Email: marianas@andromeda.rutgers.edu

Publication date: 2009-06-03

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