Local linkages: The interdependence of foreign and domestic firms in Ireland

Kate Hynes*, Yum K. Kwan, Anthony Foley

*Corresponding author for this work

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

3 Citations (Scopus)

Abstract

This paper contributes to the literature on backward linkages—the degree of localization in input usage, focusing on the potential interdependence between foreign and domestic producer firms. Drawing on Irish sectoral data during 2000–2013, our main objective is to empirically examine how foreign and domestic producer firms' backward linkages might dynamically influence each other, and the extent to which they respond to export intensity and productivity levels from the two groups of firms. We find an interesting asymmetric interdependence pattern: (1) domestic firms' backward linkages are not impacted by the backward linkages of foreign firms; (2) more robust backward linkages of domestic firms can potentially induce more backward linkages from foreign firms; and (3) domestic firms' productivity shocks could generate a dynamic crossover impact on foreign firms' backward linkage status, but similar shocks originating from foreign firms generate little crossover impact on domestic firms’ backward linkage status. Our result on interdependent local linkages points to a potentially important role for domestic-to-domestic backward linkage formation in promoting foreign-to-domestic backward linkages.
Original languageEnglish
Pages (from-to)139-153
JournalEconomic Modelling
Volume85
Online published16 May 2019
DOIs
Publication statusPublished - Feb 2020

Bibliographical note

Research Unit(s) information for this publication is provided by the author(s) concerned.

Research Keywords

  • Backward linkages
  • Multinationals
  • Foreign direct investment

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