Productivity spillovers from foreign multinationals and trade protection: firm-level analysis of Vietnamese manufacturing

This paper examines how the presence of foreign multinational enterprises (MNEs) affects productivity in domestic private firms in Vietnamese manufacturing in 2005-10. The paper also examines how import protection has affected these productivity spillovers and how spillovers from wholly foreign MNEs and joint ventures differ. The most consistent result suggests wholly foreign MNEs impart negative spillovers while joint ventures tend to generate positive spillovers. Theory and random effects estimates also indicate that import protection reduces local firm productivity and weakens the effect of spillovers from all MNEs; but this result is not obtained when a fixed effects estimator is used. Results are similar in samples of labour-intensive industries, which include close to three fourths of all sample firms, but differ markedly for more capital-intensive groups.