Intra-industry Technology Spillover from Multinational Enterprises in South East Asia

Abstract

The main purpose of this study is to examine spillover of technology from MNEs to the domestic firms in Southeast Asia. The study focused on technology spillover from MNEs to domestic firms within the same industry. Using secondary panel data obtained from World Bank Enterprise Survey, this study examined the impact of technology spillover through three channels; demonstration effect, competition effect, and workers' mobility effect on the productivity of domestic firms in five Southeast Asia countries namely; Indonesia, Philippines, Vietnam, Laos, and Myanmar. The five countries were selected due to availability of panel data from the World Bank Enterprise Survey. The effect of the domestic firms' absorptive capacity on their productivity was also examined. This study therefore compared the results of the selected countries. Multiple regression analysis was used to test the hypotheses of this study. The results revealed that the most important channel of technology spillover to the domestic firms is the workers' mobility effect and the absorptive capacity of the domestic firms influence their productivity. Furthermore, the result revealed that only firms in Vietnam benefit from technology spillover through demonstration effect. On the other hand, the effect of competition was largely negatively among the countries indicating that intense competition from the MNEs reduces the productivity of the domestic firm. The implication of this is that tacit knowledge is the form of technology that spillover across the Southeast Asia countries studied.