José Manuel Rueda Cantuche, Jorge López, Pablo Piñero, Santacruz Banacloche, Luis Pedauga

Hisamitsu Saito

FIGARO-regio is a 56 industry-by-industry multiregional input-output table for more than 200 regions in Europe (NUTS2) for the year 2017, developed by the European Commission and consistent with Eurostat’s official statistics (FIGARO). The Single Exposure Indicator combines two well-known TiVA indicators in a single and consistent format, to identify all key dependences in bilateral trade among partners. The novelty of this research relies on the data (with such a level of disaggregation in both industry and regions) and methods (brand new TiVA indicator). Using the FIGARO-regio database and the Single Exposure Indicator combined allows regional global value chains to be analysed providing interesting results to policy-makers, related to dependences, potential risks and vulnerabilities of regions at the industry level.

Hisamitsu Saito (p), Toshiyuki Matsuura

Jorge M. López-Álvarez

This study examines whether and to what extent inward foreign direct investment (FDI) contributes to quality upgrading of local firms in developing countries. Product quality is key for firms’ export performance. Furthermore, recent studies stress that non-exporting firms are also considerably involved in global competition through production networks. For example, multinational enterprises (MNEs) attracted to developing countries source their inputs from local firms that can meet strict requirements on product quality. Therefore, upgrading product quality is a concern not only for exporting but also for non-exporting firms.

Many studies have identified the spillover impact from MNEs on productivity, wages, or employment of local firms. In contrast, only a few have examined their impact on product quality. Furthermore, the focus of those studies is limited to exporting firms. Hence, it remains an empirical issue whether quality upgrading spillovers from MNEs benefit the majority of local firms not engaging in exporting activities. If the enhanced opportunities to transact with MNEs increase the incentives of local intermediate suppliers to upgrade the quality of their products and if they can learn MNEs’ advanced technology and business practices for that purpose, attracting inward FDI contributes to the host economy by strengthening the competitiveness of both local exporters and intermediate suppliers.

To identify quality upgrading spillovers, we employ the Indonesian manufacturing census. Indonesia constitutes an important part of the international production networks and thus, quality upgrading matters for local intermediate suppliers. Furthermore, the firm-product level data allow us to classify goods between exported and non-exported ones and between intermediate and consumption ones. Using the unit price and quantity shipped of individual products, we first estimate the quality of each product in a theory-consistent manner. Then, we relate product quality estimates to variables that measure the intensity of MNE activity within a region.

Our results are summarized as follows. While previous studies confirm the quality upgrading spillovers on exporting firms from inward FDI into upstream industries, we find that inward FDI into downstream industries is key for product quality improvement. Regardless of their export status, any local firms producing intermediate products can benefit from MNEs located in the same region. These findings suggest that quality upgrading spillovers should be effective in enhancing the competitiveness of local firms, particularly of those involved in global competition.