Proceedings of 10th Global Business and Social Science Research Conference
23 -24 June 2014, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-55-9
The Foreign Direct Investment Spillover Effect in ASEAN
Wei-Long Lee
Because free trade areas (FTAs) eliminate tariff and trade barriers among member countries
and reduce multinational corporations’ transaction costs, multinational enterprises’ (MNEs)
foreign direct investment (FDI) and their backward/forward linkage and procurement
activities in FTAs have been enhanced.
However, whether the quality of MNEs’
procurement can improve manufacturer productivity by taking advantage of technical
supports and whether an FDI spillover effect can be generated through backward/forward
spillover are unclear.
Therefore, this study investigates whether FDI in FTAs have a
spillover effect and analyzes panel data from 1,049 manufacturers in six countries of the
Association of Southeast Asian Nations (ASEAN) between 1999 and 2009.
The results
indicate that FDI within one country does have a spillover, but that spillover has no effect on
local manufacturers.
In addition, this study finds that the degree of economic freedom has a
significant positive correlation with improvement in local manufacturers’ productivity.
Keywords: FDI, Spillover Effect, ASEAN
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Dr. Wei-Long Lee, Associate Professor, Department and Graduate Institute of International Business, National
Kaohsiung University of Applied Sciences, Taiwan