The Spillover Effect of Multinational Companies on Local firms A Study conducted in Ethiopia

Abstract

The presences of MNCs have direct and indirect impacts on the performance of local firms in newlinethe host country. This study was conducted with the aim of empirically examining the indirect newlineeffects with particular emphasis on productivity spillover, export market spillover and newlinetechnology spillover effect by employing both balanced secondary panel data from 2010-2014 newlineand firm-level primary cross-sectional data from 214 Ethiopian medium and large-scale newlinemanufacturing industries. Ordinary Least Square, Random effect, and Fixed effect estimation newlinetechniques were used to examine productivity spillover while logit model was employed to newlineexamine export spillover effects. Moreover, descriptive statistics was used to analyze the newlineprimary data. First, the finding unveils that, MNCs presence enhances the productivity of local newlinefirms and hence there is positive productivity spillover. Second, the outcome ratified that newlineexporting local firms with low technology gap having joint venture with MNCs benefited more newlinefrom the productivity spillover effects while ownership equity and firms size has insignificant newlineeffects on spillover occurrence. Third, it is unearthed that the increasing presence of MNCs newlinedecreases the likely hood of local firms export decision and export propensity (negative export newlinespillover). Finally, the primary data confirmed that demonstration is the most significant newlinechannel to cause spillover while organizational and administration is the most commonly newlineimplemented spillover kinds. In the mean time, the composite spillover index confirms the newlineoccurrence of an average level of spillover magnitude. Given all these findings, it is confided newlinethat the presences of MNCs in Ethiopia do not fully enhance local firms performance. newline