Multinational Enterprises, Absorptive Capacity and Export Spillovers: Evidence from Polish Firm‐level Data

• Author: Andrzej Cieślik,Jan Hagemejer
• DOI: http://doi.org/10.1111/rode.12113
• Published date: 01 November 2014
• Date: 01 November 2014

Multinational Enterprises, Absorptive Capacity

and Export Spillovers: Evidence from Polish

Firm-level Data

Andrzej Cies´lik and Jan Hagemejer*

Abstract

An important benefit attributed to the activity of multinational enterprises (MNEs) in developing and tran-

sition countries is its effect on international market access. Through a variety of channels the presence of

MNEs is expected to reduce the costs faced by indigenous firms in breaking into international markets and

in turn boost their export prospects. In this paper we use an extensive Polish firm-level dataset for the

period 2000–2008 to verify whether MNEs have positively contributed to the export performance of indig-

enous firms. We track not only sectoral and geographical spillovers stemming from the activity of MNEs

but also control for firm-specific characteristics that affect indigenous firms’ decisions to export including

their absorptive capacity. Our empirical results support the existence of positive spillovers (related to MNE

export activity) at the sectoral level but not at the regional level. Finally, we find that individual absorptive

capacity determines the size of export spillovers.

1. Introduction

The growing trend in liberalization of economic activity worldwide has greatly

increased the role of multinational enterprises (MNEs) in stimulating economic

development. According to the World Investment Report (United Nations Conference

on Trade and Development, 2012) more than the half of world foreign direct invest-

ment (FDI) inflows goes to developing and transition countries. Although most of

these inflows are targeted towards the so-called emerging markets located mainly in

South-East Asia and Latin America, an increase in FDI inflows to the post-

communist countries of Central and Eastern Europe that joined the European Union

has also been reported.

Inward FDI is often perceived by governments in many emerging economies as an

important channel for diffusion of technical and commercial knowledge among indig-

enous firms. This is especially important for developing and transition countries that

are still lagging behind in terms of own research and development (R&D) and inno-

vation capacities. Therefore, from the policy perspective it is important to investigate

whether the MNE activity indeed positively affects host country economies and indig-

enous firms. In particular, it is important to verify the magnitude and identify the type

of spillovers from MNEs in developing and transition countries empirically since the

* Cies´ lik: University of Warsaw, Faculty of Economic Sciences, ul. Długa 44/50, Warszawa-00241, Poland.

Tel: +48-22-8314725; Fax: +48-22-8312846; E-mail: cieslik@wne.uw.edu.pl. Hagemejer: University of

Warsaw and National Bank of Poland, ul. S

´wie˛ tokrzyska 11/21, 00-919 Warszawa. The authors would like

to thank an anonymous referee for valuable comments and suggestions on the previous version of this

paper. The views in this paper are those of the authors and do not necessarily reflect those of National

Bank of Poland.

Review of Development Economics, 18(4), 709–726, 2014

DOI:10.1111/rode.12113

© 2014 John Wiley & Sons Ltd

effects on their economies could be relatively large compared with the effects on the

margin in developed countries.

Two main strands in the empirical literature on the role of MNEs in spreading

knowledge in developing and transition countries can be distinguished. The first

strand focuses on general productivity spillovers stemming from MNE activity, while

the second takes a narrower view and focuses only on export spillovers. The litera-

ture on productivity spillovers from MNEs is enormous while the impact of MNEs

on export behavior of host-country firms still remains a relatively underexplored

topic. Therefore, the main goal of this paper is to study the potential role of MNEs

in enhancing the export performance of indigenous firms in Poland using the exten-

sive firm-level dataset for the period 2000–2008.

Poland, which joined the EU in 2004, is frequently mentioned as a prime example

of a successful transition from inward-oriented central planning to a fast growing

open market economy. However, by the end of the 1990s Poland still remained iso-

lated from the world economy in terms of both international trade and FDI. Interna-

tional trade transactions were monopolized by a few specialized stated-owned foreign

trade companies and local firms had neither direct contacts with foreign buyers of

their products nor relevant information about foreign markets.

This transition manifested itself in rapid trade expansion and reorientation of trade

from the East to the West. Per capita exports in Poland increased more than tenfold

from US$324 in 1987 to US$4981 in 2011 (Central Statistical Office, 2012a). At the

same time Poland ranks as one of the largest recipients of FDI among the emerging

markets. Since the beginning of the economic transition in 1989 Poland received over

US$198 billion of foreign capital in FDI (National Bank of Poland, 2012). The share

of MNEs in Poland’s exports increased from 12% in 1992 to over 60% in 2011

(Central Statistical Office, 2012b).

It has been frequently argued that the expansion of Poland’s exports can be

attributed to the activity of MNEs. However, in addition to the direct impact

MNEs may also increase country’s exports indirectly by stimulating exports of indig-

enous firms. Drawing on the new trade theory literature that emphasizes the role of

firm heterogeneity we study two potential channels through which MNE activity can

affect the export activity of indigenous firms: (i) increase in their overall productiv-

ity owing to general MNE productivity spillovers that decrease production costs, (ii)

a decrease in the cost of exporting owing to information spillovers associated with

MNE export activity. We study two dimensions of MNE related spillovers: sectoral

and regional, having controlled for the set of individual characteristics, such as the

absorptive capacity of indigenous firms that may determine their ability to benefit

from export spillovers.

The structure of this paper is as follows. In section 2 we review the relevant litera-

ture. In section 3 we develop the analytical framework to underpin our empirical

study. In section 4 we discuss the statistical methodology and describe the dataset. In

section 5 we report our estimation results. Section 6 summarizes and provides direc-

tions for further studies.

2. Literature Review

As global leaders in innovation, MNEs are important means of disseminating their

knowledge to developing and transition countries for which tapping into the world

knowledge stock is critical.1The possibility for positive spillovers arises because these

710 Andrzej Cies´ lik and Jan Hagemejer

© 2014 John Wiley & Sons Ltd