Journal of Business Research 67 (2014) 1376–1387

Contents lists available at ScienceDirect

Journal of Business Research

Is foreign direct investment productive? A case study of the regions

of Vietnam
Sajid Anwar a,c,⁎, Lan Phi Nguyen b,1
a
School of Business, University of the Sunshine Coast, Maroochydore, QLD 4558, Australia
b
Monetary Statistics and Forecasting, State Bank of Vietnam, Hanoi, Viet Nam
c
IGSB, University of South Australia, Adelaide, SA 5001, Australia

a r t i c l e i n f o a b s t r a c t

Article history: By making use of a recently released dataset that covers a large number of manufacturing firms over the period
Received 1 February 2013 2000–2005, this paper examines the impact of foreign direct investment (FDI) and FDI generated spillovers on
Received in revised form 1 July 2013 total factor productivity (TFP) in eight regions of Vietnam. Unlike most existing studies, this paper focuses on
Accepted 1 August 2013
the impact of spillovers that take place through both horizontal and vertical linkages. The results presented in
Available online 27 September 2013
this paper suggest that the impact of FDI spillovers on TFP varies considerably across regions. FDI spillovers generate
Keywords:
a strong positive impact on TFP through backward linkages only in Red River Delta, South Central Coast, South East
Foreign direct investment and Mekong River Delta while in other regions the impact is negative and mostly insignificant. The paper also
Total factor productivity examines the impact of the absorptive capacity on TFP growth in each of the eight geographical regions.
Technological progress © 2013 Elsevier Inc. All rights reserved.
Panel data analysis
Vietnam

1. Introduction
Economic reforms create international business opportunities. Due to
the rising cost of doing business in China, Vietnam has become a popular
destination for foreign investment. A number of existing studies have
examined the impact of foreign direct investment (FDI) and FDI-related
spillover effects on firm productivity and export behavior in developed
as well as developing countries. This paper focuses on Vietnam, a country
that due to the rising cost of doing business in China is now attracting
significant FDI. However, due to lack of appropriate data, so far, relatively
few studies have considered the case of Vietnam.
In recent years, the government of Vietnam has started releasing firm
level data, including data on FDI inflows that could be used to examine the
impact of FDI-related spillover effects on firm performance. Most existing
studies, for example Anwar and Nguyen (2010a) and Athukorala and Tien
(2012), focus only on the direct effect of FDI on firm performance in
Vietnam. In addition, the existing studies (such as Anwar and Nguyen,
2010b) are highly aggregated and hence do not present a clear picture
of the impact of FDI on different regions of Vietnam. An important role
of the government is to take steps to reduce regional economic disparity.
A region by region analysis of the impact of FDI-related spillover effects
(i.e., the indirect effect) on firm productivity can provide useful informa-
tion to domestic policy makers.
⁎ Corresponding author. Tel.: +61 7 5430 1222.
E-mail addresses: SAnwar@usc.edu.au (S. Anwar), nplan_dbtk@sbv.gov.vn
(L.P. Nguyen).
1
Tel.: +84 91 775 1123.
By making use of a firm level panel dataset, this paper empirically
examines the impact of FDI generated horizontal and vertical spillovers
on total factor productivity (TFP) of manufacturing firms located in all
eight regions of Vietnam.
The rest of this paper is structured as follows. Section 2 contains a
review of related studies. Section 3 includes a brief description of the
methodology. The empirical results are presented and discussed in
Section 4. Section 5 contains some concluding remarks.
2. Review of related studies
While a number of studies have examined the impact of FDI on firm
productivity and GDP growth, relatively few studies have explicitly
considered the impact of FDI-related spillover effects on productivity.
Liu (2002) and Liu and Wang (2003) consider the effect of FDI on tech-
nology transfer in China but they do not consider the impact of spillover
effects. Pan (2003) outlines source and host country factors that can
affect foreign direct investment in China. Bwalya (2006) examines the
nature of spillover from foreign to domestic firms by using firm level
data on Zambian manufacturing firms for the period 1993–1995.
Bwalya finds little evidence in support of technology spillovers from
foreign firms to local firms through horizontal channels, suggesting
that the productivity of local firms is negatively affected by the scale of
operation of foreign firms.
Stancik (2007) considers the effect of FDI on the growth rate of
sales of domestic firms in the Czech Republic by using firm level panel
data from 1995 to 2003. Stancik focuses on the impact of FDI spillovers.
The empirical results suggest that the presence of foreign firms has

0148-2963/$ – see front matter © 2013 Elsevier Inc. All rights reserved.
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 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387 1377

adversely affected most domestic firms in the Czech Republic, especially Table 2
in upstream sectors. FDI in regions of Vietnam (1988 to 2005).
Source: GSO (2013).
Bitzer, Geishecker, and Görg (2008) use industry level data for 17 Or-
ganisation for Economic Cooperation and Development (OECD) countries Regions of Vietnam Number of FDI in million FDI projects
to investigate the importance of horizontal and vertical spillovers. Their FDI projects US dollars at in percentage
constant prices of the total
empirical work shows that spillovers through vertical backward linkages
between multinationals and domestic firms exist in all 17 countries. They Red River Delta 1239 14884.3 20.10
North East 291 1945.5 4.72
also found evidence to support the existence of positive spillover effects
North West 23 100.6 0.37
from horizontal FDI. Using annual data on 44 host countries over the pe- North Central Coast 90 1368.8 1.46
riod 1983–2003, Beugelsdijk, Smeets, and Zwinkels (2008) argue that FDI South Central Coast 280 3476.3 4.54
generated horizontal and vertical effects have a significant positive impact Central Highlands 94 1001.1 1.52
on host developed countries but those benefits to host developing coun- South East 3831 32380.5 62.15
Mekong River Delta 268 1812.9 4.34
tries are insignificant. Liu (2008) examines the effect of technology trans-
fer arising from FDI in the Chinese manufacturing sector, finding that
spillovers through backward and forward linkages have a positive effect
on productivity of domestic firms and backward linkages are the most im- data to investigate the effect of FDI-related horizontal, backward and
portant channel through which technology spills over from foreign to do- forward spillover effects in Vietnam's manufacturing and services sec-
mestic firms. Using an event history technique, Lin (2010), focuses on the tors. However, they do not consider the effect of FDI-related spillovers
determinants of Taiwanese investment in China’s IT industry. Du,
on TFP growth. The same applies to the work of Athukorala and Tien
Harrison, and Jefferson (2012) examine the impact of FDI-related hori- (2012). Anwar and Nguyen (2010a) found that a two-way mutually
zontal and vertical spillovers on the productivity of Chinese manufactur-
reinforcing relationship between output growth and FDI growth
ing firms. They find that horizontal spillovers have a weak effect on exists in Vietnam. However, TFP is a better measure of productivity
productivity but the impact of vertical spillovers is statistically significant.
(Lipsey & Carlaw, 2004). Other studies on Vietnam include Binh and
In summary, the empirical evidence regarding the impact of FDI gen- Haughton (2002), Giroud (2007), Anwar and Nguyen (2010b, 2011a,
erated spillovers on host economies is mixed (see Table 1, which includes
2011b), and Nguyen and Sun (2012). These studies have focused on
only some of the recent studies). A review of earlier studies can be found the impact of FDI on trade and export performance. Unlike the existing
in Meyer and Sinani (2009), Table 1. Some existing studies suggest that
studies, this paper focuses on the impact of indirect effect of FDI on all
the impact of FDI generated spillover effects also depends on the absorp- eight regions of Vietnam and TFP is used as a measure of productivity.
tive capacity of host countries. This means that the impact of FDI spillovers
FDI in Vietnam concentrates mostly in the key economic regions,
on host countries can vary from country to country and from industry to namely Red River Delta, North East, South East, and Mekong River Delta,
industry.
while remote regions receive only a small fraction of FDI (see Table 2).
Table 2 shows that differences between regional economic growth
2.1. FDI in Vietnam rates and per-capita income across regions are significant. In 2005, the
per-capita income in South East was more than twice the national aver-
Due to lack of data, only a few studies attempt to investigate the age. The per-capita income in Red River Delta was the same as the na-
impact of FDI on Vietnam. These studies consider a number of issues. tional average, but income in North West was approximately 40% of
For example, Jenkins (2006) considers the direct effect of FDI on employ- the national average (see Table 2). These differences can influence the
ment growth in Vietnam (especially in early years), finding only a limited magnitude of FDI-related horizontal and vertical spillovers. Accordingly,
positive effect. Athukorala and Tien (2012) suggest that, in recent years, a region-wise analysis can present a better picture of the benefits from
FDI inflows have played an important role, not only in providing invest- FDI (Table 3).
ment capital but also in stimulating export growth. Le (2005) examines The broad hypotheses tested in the following section include (1) the
the effect of FDI on labor productivity of 29 Vietnamese manufacturing impact of FDI and FDI-related spillovers on productivity of domestic
industries over the period 1995–2002. Le found FDI's effect on productiv- firms varies across the regions of Vietnam and (2) absorptive capacity
ity to be positive. Nguyen and Nguyen (2007) used firm-level data to in- (as measured by human capital, technology gap with foreign firms and
vestigate the effect of FDI spillovers. They conclude that FDI has resulted the level of financial development) enhances the FDI spillover effects
in improved labor productivity. Nguyen et al. (2008) used firm level across the regions of Vietnam.

Table 1
FDI and economic performance — A summary of some recent studies.

Bwalya (2006) 1993–1995 Zambia Panel data FDI spillovers through horizontal channels have a positive impact on firm output.
Abu-Bader and Abu-Qarn 1960–2001 Egypt Time series There is a bi-directional relationship between financial development and economic growth.
(2008)
Alvarez and Lopez (2008) 1990–1999 Chile Panel data Exporting leads to positive spillover effects.
Beugelsdijk et al. (2008) 1994–2003 44 countries Panel data Vertical FDI has a stronger positive impact on productivity.
Bitzer et al. (2008) 1989–2003 17 OECD Countries Panel data FDI linked backward spillovers have a positive impact on productivity.
Liu (2008) China 1995–1999 Panel data FDI can have a negative impact on productivity in the short term but its impact on long term
productivity is positive.
Barbosa and Eiriz (2009) Portugal 1994–1999 Panel data FDI spillovers do not have a significant impact on firm productivity.
Suyanto et al. (2009) Indonesia 1988–2000 Panel data FDI and FDI-related spillovers have a positive impact on productivity.
Anwar and Nguyen (2010) 1990–2007 Vietnam Panel data There is a bi-directional relationship between FDI and economic growth.
Wang (2010) 1973–1991 Canada Panel data FDI generates strong positive impact on productivity.
Anwar and Nguyen (2011a) 2004 Vietnam Cross section data FDI has contributed to increase in net exports in the post Asian crisis period.
Anwar and Nguyen (2011b) 2000–2007 Vietnam Panel data FDI spillovers can have positive impact on export performance of domestic firms.
Nguyen and Sun (2012) 2003–2004 Vietnam Panel data FDI spillovers improve firm export performance.
Athukorala and Tien (2012) 2000–2005 Vietnam Time series data FDI has a positive impact on real output.
Du et al. (2012) 1998–2007 China Panel data FDI benefits local firms through both vertical and horizontal linkages.
Fernandes and Paunov (2012) 1992–2004 Chile Panel data FDI has a positive impact on productivity of firms in both manufacturing and services sectors.
1378 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387

Table 3 development within industry j, which is measured by working capital

Gross regional product per capita in US dollars. as a percentage of total assets; H _ FDIjt,B _ FDIjt and F _ FDIjt respective-
Source: GSO (2013); and authors estimates.
ly are measures of horizontal, backward-vertical and forward-vertical
2000 2001 2002 2003 2004 2005 FDI spillovers.
Red River Delta 342 361 399 453 531 615 By making use of the existing literature, (for example Grima, Görg &
North East 201 214 234 264 309 352 Pisu, 2008 and Wang, 2010), FDI spillovers are measured as follows:
North West 155 162 177 191 226 262
North Central Coast 200 208 228 252 293 336 – The horizontal spillover in industry i at time t, say H_FDIit, is calculat-
South Central Coast 275 289 321 355 418 501 ed as the proportion of output accounted for by foreign firms in that
Central Highlands 197 193 211 235 276 332 industry.
South East 866 902 963 1156 1388 1632
– The vertical backward spillover in industry i at time t is computed as
Mekong River Delta 309 316 355 393 452 517
National Average 363 379 414 477 563 657 follows:
X
B FDI it ¼ α ki H FDI ki ð4Þ
∀k≠i
3. The model and data
where αki is the proportion of industry i's output supplied to in-
The empirical model used in this paper is developed in two stages. dustry k. It is assumed that the greater the proportion of output
Stage one specifies a standard Cobb–Douglas model that can be used supplied to an industry with foreign multinational presence, the
to estimate TFP of each region. TFP is the dependent variable, whereas greater the degree of linkages between foreign and domestic
FDI-related spillovers are the independent variables. While the focus firms.
of the empirical exercise is on the impact of FDI-related spillovers on – The vertical forward spillover in industry i at time t is calculated
TFP, in stage two, we also identify a number of control variables that as follows:
can affect TFP. The inclusion of the control variables in our regression
X
equation serves to reduce the severity of omitted variable bias, which F FDI it ¼ βki H FDI ki ð5Þ
can reduce the reliability of the estimated results. ∀k≠i
Accordingly, stage two, in order to correctly estimate the impact
of FDI-related spillovers on TFP, specifies an empirical model where where βki represents the proportion of industry k's output sup-
FDI-related spillovers and other variables appear as independent plied to industry i. This measure captures the extent of forward
variables. As all identified independent variables cannot be directly linkages between domestic firms in downstream and foreign
measured, following the existing literature, we use several proxies. firms in upstream industries. The values of α and β are obtained
Similar proxies are widely used in the existing literature (for example from the Input–output Tables of Vietnam published by the Gen-
see Wang, 2010). eral Statistic Office of Vietnam (GSO).
In order to focus on the impact of FDI-related spillover effects on
The Herfindahl index, which is a measure of concentration in an in-
productivity and economic growth, in stage one, we remove the impact
dustry j, is defined as follows:
of growth in capital and labor on regional production growth, which in-
volves calculation of TFP. In stage one, TFP of Vietnamese firms in !2
Xn
xijt
manufacturing industries in all eight regions of Vietnam is estimated HERF jt ¼ i ¼ 1; 2; …; n
by means of the following production function. i¼1
X jt

δ γ
Y ijt ¼ Aijt K ijt Lijt ð1Þ where xijt is the sales of firm i in industry j; Xjt denotes the total sales of
industry j at time t.
where Yijt is the real output of domestic firm i in industry j in period t; Kijt An increase in the Herfindahl index reflects a decline in compe-
is the real book value of fixed assets of firm i (following Blomström and tition, which negatively affects TFP growth. An increase in technol-
Sjoholm, 1999, the book value is used as a proxy for capital stock); Lijt is ogy gap is expected to decrease TFP growth, whereas the effect of
the number of workers employed by firm i; Aijt is TFP of firm i in industry financial development on TFP growth is likely to be positive. TFP
j in period t; and δ and γ respectively are the production elasticities of growth is expected to be positively related to the stock of human
capital and labor. capital. An increase in sales is expected to increase TFP. Finally,
TFP (in log form) can be calculated by rewriting Eq. (1) as follows: the impact of FDI-related spillovers on TFP growth can be either




 positive or negative.
ln Aijt ¼ ln Y ijt −δ ln K ijt −γ ln Lijt : ð2Þ The empirical analysis is conducted by means of firm level panel data
for 23 manufacturing industries over the period 2000–2005. Most of the
data are collected from GSO. The number of firms per year varies from
In stage two, the impact of FDI spillovers and other control variables
(i.e., absorptive capacity) on TFP is evaluated by estimating Eq. (3) as
follows: Table 4


 Number of manufacturing firms in regions of Vietnam (2000–2005).
ln Aijt ¼ a0 þ a1 ln H ijt þ a2 Sijt þ a3 C jt þ a4 T ijt þ a5 F ijt þ a6 H FDI jt Source: GSO (2013).

þa7 B FDI jt þ a8 F FDI jt þ cijt ð3Þ 2000 2001 2002 2003 2004 2005

Red River Delta 2425 2894 3855 4071 4584 5280

where H is human capital of firm i in industry j in period t, which is North East 534 636 848 980 1469 1890
North West 66 73 94 137 170 210
approximated by real expenditure on education and training; Sijt is
North Central Coast 444 541 710 775 806 938
sales of each of the domestic firms relative to the total industry sales South Central Coast 616 756 907 1032 1057 1757
in period t; Cjt is the Herfindahl index, which is a measure of the size Central Highlands 232 259 309 361 408 496
of firms within industry j; Tijt is the technology gap which is measured South East 3672 4456 5792 6487 7965 9457
by the difference in average productivity of domestic and foreign firms Mekong River Delta 3672 4456 5792 6487 6965 7450
Total 11,661 14,071 18,307 20,330 23,424 27,478
in percentage terms in the same industry; Fijt is the level of financial
 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387
approximately 11,661 firms in 2000 to 27,478 firms in 2005 (see
Table 4). This paper utilizes this dataset as it provides all information
needed for the study. Due to confidentiality considerations, firm level
data is released with a lag. All nominal variables are measured in 1994
prices.
4. Empirical results and analysis
In stage one, using firm level panel data, we estimate TFP for each of
the eight geographical regions of Vietnam. These regions are Red River
Delta, North East, North West, North Central Coast, South Central Coast,
Central Highlands, South East, and Mekong River Delta. Calculation of
TFP involves estimation of a log-linear version of Eq. (1) by means of
OLS with a correction for heteroskedasticity.
The estimated coefficients are reported in Table 5. The results in
Table 5 suggest that both capital and labor make a statistically signifi-
cant contribution to regional output. Using the estimated coefficients
reported in Table 5 in Eq. (2), the logarithm of TFP of each region is
calculated, which is the dependent variable in the rest of this paper.
In stage two, making use of the estimated values of the dependent var-
iable for each region, Eq. (3) is estimated. This involves the use of the two-
stage least squares (2SLS) with a correction for heteroskedasticity. In
order to avoid the endogeneity that results from the presence of FDI
and industrial characteristics, dummy variables were added to the right
hand side of Eq. (3). The inclusion of dummy variables tends to reduce
the severity of the endogeneity problem. This problem arises from the
fact that industries that are known to be highly productive, in relative
terms, are likely to attract more foreign and domestic firms. The industry
capital and human capital stocks of foreign and domestic firms may be
correlated with the error term. Accordingly, this paper includes industry
dummies as regressors. This helps to remove the error term's industry-
specific unobservable effect that may be correlated with the industry
stock variables. Inclusion of the dummy variables also allows one to re-
duce the effect of omitted time-varying industry-specific shocks that
may be correlated with the FDI variables and the error term in the regres-
sion. In addition, lagged values of relevant variables were used as instru-
ments to account for the potential endogeneity problem. As indicated by
Nowak-Lehmann, Dreher, Herzer, Klasen, and Martinez-Zarzoso (2012),
in general, lagged variables are not good instruments when persistent au-
tocorrelation is present. In the case of this paper, panel data is used where
the sample period covers only 6 years and hence autocorrelation is not a
serious problem.
The Durbin–Wu–Hausman test is used to test for endogeneity. The
null hypothesis is rejected, suggesting that OLS estimates might be biased
and inconsistent and hence OLS is not an appropriate estimation tech-
nique. As a result, Hansen's J-test is used to test for over-identification of
2SLS (i.e., the null hypothesis of correct model specification and valid
over-identifying restrictions is tested and the results are found to be
satisfactory).
Table 6 shows that both the horizontal and the backward linkage
effects on the TFP level of domestic firms vary across regions. The back-
ward linkage effects are positive and statistically significant only in
Red River Delta, South Central Coast, South East and Mekong River
Table 5
Estimated production functions for Vietnamese regions.
Independent variables Red River Delta North East North West
log (K) 0.6641 0.5403 0.5174
(67.05)* (32.90)* (13.30)*
log (L) 0.4843 0.7434 0.6403
(36.46)* (34.53)* (10.96)*
Constant 0.63127 0.2301 0.7193
(14.75)* (3.60)* (4.13)*
Adjusted R2 number 0.68 0.77 0.72
of observations 15,843 4436 465
Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.
1379
Delta whereas, in other regions, these effects are either negative
and significant or positive but insignificant. This reflects the fact
that the regions that attract higher volumes of FDI and where most
of Vietnam's exportables are produced will benefit more from back-
ward linkages. As a result, the backward linkages impact positively
on TFP level of local firms. Local firms located in relatively developed
regions of Vietnam, where FDI is more productive, experience a rel-
atively rapid technology spillover from foreign to domestic firms as
compared to local firms that are located in remote regions. This
may also result in greater backward linkages for firms that are located
in relatively developed regions. The impact of FDI spillovers on TFP
varies across regions.
Table 6 shows that the impact of the horizontal spillover effect is pos-
itive and significant only in North East, Central Highland, and Mekong
River Delta regions. The backward spillover effect is positive and statisti-
cally significant only in Red River Delta, South Central Coast, South East,
and Mekong River Delta, whereas the forward spillover effect is positive
and significant only in North West and North Central Coast regions. It is
interesting to note that backward linkages are significant in those areas
that tend to receive a very big proportion of the total FDI. These are also
the areas where most of the exportable goods are produced. The introduc-
tion of domestic content requirements has contributed to stronger back-
ward linkages. For example, firms that export less than 30% of their
production were offered concessionary import duties only if these
firms satisfied the 30% local content requirement. This policy helped de-
velop stronger backward linkages in automotive, electronics and engi-
neering (Truong & Gates, 1996; Athukorala & Tien, 2012).
The empirical results presented in Table 7 suggest that local firms
located in relatively more developed regions, where FDI is concentrated,
are in general more efficient and thus possess greater ability to benefit
from advanced technologies that are introduced in the region by foreign
firms. These regions are in the second stage of Dunning's investment de-
velopment path (IDP).
The presence of FDI-generated technology spillover effects also
depends on absorptive capability (as measured by the technology gap,
human capital, and financial development) of domestic firms in host
economies (See Wang, 2010 and references therein). In order to examine
this hypothesis, this paper considers the impact of the interaction be-
tween (i) the technology gap and FDI spillovers, (ii) the stock of
human capital and FDI spillovers, and (iii) the level of financial de-
velopment and FDI spillovers on TFP of manufacturing firms in
each of the eight regions of Vietnam. The main results of empirical
estimation are summarized in Table 7, whereas detailed results
appear in Appendices 1–8.
Table 7 shows that the interaction of human capital and horizontal
spillovers has a strong positive effect on TFP of Red River Delta. This is
also true for North East and the Central Highlands. The impact of the in-
teraction between human capital and backward spillovers is positive
and significant in all regions except South Central Coast and South
East. The interaction of human capital and forward spillovers is positive
and significant only in South Central Coast. The impact of technology
gap and horizontal spillovers is negative and significant in Red River
Delta, North Central Coast, South East, and Mekong River Delta regions.
North Central Coast South Central Coast Central Highlands South East Mekong River Delta
0.6051 0.6882 0.5038 0.7008 0.8546
(37.84)* (51.18)* (19.51)* (58.97)* (77.45)*
0.5081 0.4576 0.6207 0.4165 0.3056
(21.64)* (28.12)* (18.57)* (50.01)* (22.13)*
0.8432 0.5869 1.202 0.7275 0.3234
(12.71)* (8.87)* (9.24)* (21.80)* (6.59)*
0.75 0.77 0.71 0.73 0.64
2987 3885 1354 24,286 11,922
1380 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387

Table 6
The impact of FDI on TFP of domestic firms in Vietnam's regions.

Independent variables Dependent variable: log (TFP)

Red River Delta North East North West North Central Coast South Central Coast Central Highlands South East Mekong River Delta

Human capital [log(H)] 1.1017 1.2744 0.4105 0.4797 1.3199 0.7480 0.6994 1.8812
(7.20)* (5.17)* (8.04)* (21.34)* (5.01)* (2.35)* (5.71)* (16.48)*
Scale (S) 6.7832 16.2509 3.1745 0.1383 19.2282 5.0855 1.2087 9.9852
(2.66)* (3.69)* (0.53) (0.13) (−3.32)* (0.31) (1.85)*** (6.17)*
Concentration (C) −0.2600 −0.3224 −0.6395 −0.3367 −0.4171 −0.1886 −0.1723 −0.3275
(−1.92)* (−2.42)* (−1.67)*** (−2.67)* (−1.91)** (−0.39) (−1.30) (−1.70)***
Technology gap (T) −0.0003 −0.0002 −0.0046 −0.0021 −0.0008 −0.0060 −0.0003 −0.0004
(−26.51)* (−0.92) (−7.12)* (−11.53)* (−4.54)* (−3.94)* (−11.54)* (−1.15)
Horizontal FDI spillovers −0.0029 0.0044 −0.0008 −0.0018 −0.0019 0.0037 −0.0051 0.0115
(−5.43)* (3.59)* (−0.33) (−1.91)** (−1.78)*** (1.84)*** (−10.79)* (8.14)*
Backward FDI spillovers 0.0003 −0.0001 −0.0028 −0.0060 0.0021 −0.0010 0.0022 0.0019
(2.18)** (−0.14) (−1.36) (−7.70)* (2.12)** (−0.54) (5.54)* (1.83)***
Forward FDI spillovers −0.0041 −0.0086 0.0165 0.0043 −0.0087 −0.0051 −0.0078 −0.0411
(−2.55)* (−2.87) (2.93)* (2.04)** (−3.57)** (−1.10) (−9.01)* (−15.45)*
Financial development (F) 0.7444 1.0106 0.8286 0.9349 0.8172 1.0561 1.0828 0.7001
(8.95)* (9.95)* (5.00)* (11.99)* (10.65)* (9.38)* (39.24)* (10.95)*
Time dummies Yes Yes Yes Yes Yes Yes Yes Yes
Industry dummies Yes Yes Yes Yes Yes Yes Yes Yes
Hansen test (p-value) 0.21 0.22 0.45 0.55 0.18 0.22 0.28 0.68
Durbin–Wu–Hausman (p-value) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Number of observations 15,843 4436 465 2987 3885 1354 24,286 11,922
R-squared 0.30 0.27 0.38 0.43 0.25 0.34 0.43 0.27

Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.

The interaction of technology gap and backward spillovers is negative
and significant in Red River Delta, North East, North Central Coast, and
South East regions. The interaction of technology gap and forward spill-
overs is negative and significant in all regions except Red River Delta,
North East, and North Central Coast regions. The interaction of the
level of financial development and horizontal spillovers is positive and
significant only in Red River Delta, North Central Coast, and South
East regions. The interaction of the level of financial development
and backward spillovers is positive and significant only in Red
River Delta and North East regions. Finally, the interaction of the
level of financial development and forward spillovers is positive and
significant only in South East region. It is clear that, as far as the level
of financial development is concerned, Vietnam has a long way to go.
In others words, steps need to be taken to improve the level of financial
development in Vietnam.
5. Conclusion
This paper focuses on the impact of FDI and FDI-generated spillovers
on total factor productivity (TFP) growth of manufacturing firms located
in all eight regions of Vietnam. An increase in TFP can be attributed to
technological advancement. The empirical analysis presented in this
paper is based on panel data that covers a large number of manufacturing
firms over the period 2000–2005. Unlike the existing studies, this paper
considers the impact of FDI spillovers on TFP growth via both horizontal
and vertical linkages in different regions of Vietnam. The paper also con-
siders the role of absorptive capacity.
The results presented in this paper suggest that impact of FDI and
FDI spillovers on TFP of Vietnam's manufacturing firms varies across
regions. In other words, the presence of foreign firms is contributing
to technological advancement in Vietnam but the rate of such ad-
vancement varies considerably across regions of Vietnam. Backward
linkages with foreign firms are an important channel of technology
transfer from foreign to domestic firms in Red River Delta, South
Central Coast, South East, and Mekong River Delta. These regions are
well known for (i) better quality infrastructure, (ii) higher level of
human capital stock, and (iii) relatively more advanced technology.
The empirical analysis presented in this paper also suggests that the
effect of horizontal and vertical linkages with foreign firms on TFP
of local firms also depends on Vietnamese regions' absorptive capac-
ity. Regions with better technology, stock of human capital and a rel-
atively higher level of financial development gain more benefits from
FDI spillovers. It appears that North East, North West, North Central
Coast, and Central Highlands regions have not significantly benefited

Table 7
Absorptive capacity and TFP growth in Vietnamese regions.

Red River Delta North North North Central South Central Central South Mekong River
East West Coast Coast Highlands East Delta

Interaction of H and horizontal spillovers P&S P&S N & IS N & IS N&S P&S P & IS N & IS
Interaction of H and backward spillovers P&S P&S P & IS P&S N&S P&S N&S P&S
Interaction of H and forward spillovers N&S N&S P & IS N & IS P&S N&S P & IS P & IS
Interaction of T and horizontal spillovers N&S N & IS P & IS P&S N&S N & IS N&S N&S
Interaction of T and backward spillovers N&S N&S P&S N&S P & IS P & IS N&S N & IS
Interaction of T and forward spillovers N & IS P & IS N&S P & IS N&S N&S N&S N&S
Interaction of F and horizontal spillovers P&S N & IS N & IS P&S N & IS N & IS P&S N & IS
Interaction of F and backward spillovers P&S P&S P & IS P & IS N&S P & IS N&S N&S
Interaction of F and forward spillovers P & IS N&S N & IS N & IS P & IS N & IS P&S N & IS

Notes: H — stock of human capital; T — technology gap; F — the level of financial development; P — positive effect on TFP; N — negative effect on TFP; S — significant and IS — insignificant.
 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387 1381

from backward linkages but these regions have benefited from hori-
zontal or forward linkages. It seems that government policy that en-
courages foreign firms to invest in outer regions of Vietnam has so far
not worked.
Based on the empirical analysis presented in this paper, Vietnam
can gain more benefits from FDI by improving its absorptive capacity.
At the central level, Vietnam needs to further develop its financial
system. Increased transparency is the first step in this direction
followed by further liberalization. Increase in real spending on ad-
vanced education and training may help to reduce the technology
gap between foreign and local firms and increase the stock of
human capital. This combined with infrastructure improvement can
help to boost manufacturing sector productivity.
Empirical analysis of more recent data when available would allow
one to assess the impact FDI-related spillovers in the post global
financial crisis period. In addition to the impact of FDI on productiv-
ity in Vietnam, one can also examine the impact of FDI on product
quality. Recent studies such as Chang, Kao, Kuo, and Chiu (2012)
have highlighted the importance of governance quality in the con-
text of firm entry choices. It would be useful to examine the interac-
tion of governance quality and FDI on industrial growth in Vietnam.
Finally, one can also examine the impact of FDI on entrepreneurship
in Vietnam; specifically, the impact of FDI on entry and exit of domestic
firms.
Acknowledgments

5.1. Limitations and areas for further research
The quality of Vietnamese data is questioned in some prior stud-
ies. The General Statistics Office of Vietnam has taken steps to im-
prove reliability of the data collection process. More recent data,
when it becomes available, is likely to be relatively more reliable.
This paper has greatly benefited from extremely useful com-
ments and suggestions received from two anonymous reviewers.
The authors are also grateful to Dr Robert Alexander and participants
of seminar at Griffith University (QLD, Australia) and Flinders Uni-
versity (SA, Australia). However, the authors are solely responsible
for all remaining errors and imperfections.

Appendix 1. The effect of FDI on TFP in Red River Delta

Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital [log(H)] 1.1017 1.1975 2.3708 1.0868

(7.20)* (5.58)* (2.36)** (5.39)*
Scale (S) 6.7832 8.3485 2.5549 6.5548
(2.66)* (2.36)** (2.31)** (1.90)***
Concentration (C) −0.2600 0.2069 0.9492 0.2536
(−1.92)* (1.15) (1.15) (1.48)
Technology gap (T) −0.0003 −0.0001 −0.0003 −0.0002
(−26.51)* (−1.79)*** (−5.28)* (−5.60)*
Horizontal FDI spillovers −0.0029 −0.3163 2.9881 −0.5786
(−5.43)* (−5.24)* (1.75)*** (−4.38)*
Backward FDI spillovers 0.0003 0.0002 0.0099 −0.0023
(2.18)** (0.40) (3.36)* (−1.99)**
Forward FDI spillovers −0.0041 −0.0037 0.0543 −0.0001
(−2.55)* (−1.92)** (1.52) (1.20)
Financial development (F) 0.7444 0.6946 0.7977 0.6102
(8.95)* (6.44)* (6.17)* (4.41)*
Technology gap ∗ horizontal 0.00001
(1.92)**
Technology gap ∗ backward 0.00001
(2.62)*
Technology gap ∗ forward −0.00005
(−3.21)*
Human capital ∗ horizontal −0.0169
(1.94)**
Human capital ∗ backward −0.0055
(−3.60)*
Human capital ∗ forward −0.0316
(−1.53)
Financial development ∗ horizontal 0.0052
(2.20)**
Financial development ∗ backward 0.0049
(2.48)*
Financial development ∗ forward −0.0075
(−1.56)
Time dummies Yes Yes Yes Yes
Industry dummies Yes Yes Yes Yes
Hansen test (p-value) 0.21 0.12 0.14 0.57
Durbin–Wu–Hausman (p-value) 0.00 0.00 0.00 0.00
Number of observations 15,843 15,843 15,843 15,843
R-squared 0.30 0.27 0.20 0.31

Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.
1382 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387

Appendix 2. The effect of FDI on TFP in North East

Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital [log(H)] 1.2744 0.4035 0.3194 0.6056

(5.17)* (1.10) (0.76) (1.83)***
Scale (S) 16.2509 −2.9655 −2.8065 −5.6267
(3.69)* (0.49) (−0.91) (−0.96)
Concentration (C) −0.3224 −0.1418 −0.2266 0.1542
(−2.42)* (−0.73) (−0.85) (0.87)
Technology gap (T) −0.0002 −0.0034 −0.0009 −0.0006
(−0.92) (−2.71)* (−3.52)* (−2.48)**
Horizontal FDI spillovers 0.0044 0.3061 −0.2457 0.5952
(3.59)* (1.98)** (−0.41) (2.06)**
Backward FDI spillovers −0.0001 −0.0025 0.0088 −0.0071
(−0.14) (−2.08)** (3.99)* (−3.62)*
Forward FDI spillovers −0.0086 0.0039 −0.0200 0.0072
(−2.87) (0.69) (−0.93) (1.30)
Financial development (F) 1.0106 1.2495 1.2794 1.3992
(9.95)* (10.25)* (17.76)* (11.59)*
Technology gap ∗ horizontal 0.00002
(0.36)
Technology gap ∗ backward 0.00018
(2.62)*
Technology gap ∗ forward −0.00045
(−2.20)**
Human capital ∗ horizontal 0.0027
(0.94)
Human capital ∗ backward −0.0052
(−4.51)*
Human capital ∗ forward 0.0101
(0.76)
Financial development ∗ horizontal −0.0064
(1.36)
Financial development ∗ backward 0.0141
(3.79)*
Financial development ∗ forward −0.0209
(−2.56)*
Time dummies Yes Yes Yes Yes
Industry dummies Yes Yes Yes Yes
Hansen test (p-value) 0.22 0.52 0.19 0.18
Durbin–Wu–Hausman (p-value) 0.00 0.00 0.00 0.00
Number of observations 4436 4436 4436 4436
R-squared 0.27 0.31 0.47 0.46

Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.

Appendix 3. The effect of FDI on TFP in North West

Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital [log(H)] 0.4105 0.7991 1.3296 0.6477

(8.04)* (3.19)* (2.24)** (2.81)*
Scale (S) 3.1745 −1.4416 −1.0360 0.4318
(0.53) (−0.51) (−0.40) (0.18)
Concentration (C) −0.6395 −0.6292 −0.9543 −0.6638
(−1.67)*** (−1.64)*** (−2.18)** (1.82)***
Technology gap (T) −0.0046 −0.0041 −0.0039 −0.0033
(−7.12)* (−3.20)* (−4.49)* (−2.34)**
Horizontal FDI spillovers −0.0008 0.3213 −0.2272 0.4882
(−0.33) (1.00) (−0.26) (0.82)
Backward FDI spillovers −0.0028 −0.0048 −0.0208 −0.0062
(−1.36) (−2.16)** (−2.25)* (−1.19)
Forward FDI spillovers 0.0165 0.0160 0.1071 0.0222
(2.93)* (2.67)* (2.15)** (1.65)***
Financial development (F) 0.8286 0.7067 0.7631 0.9694
(5.00)* (3.34)* (4.17)* (2.67)*
Technology gap ∗ horizontal −0.00004
(−0.59)
Technology gap ∗ backward 0.00004
(1.01)
Technology gap ∗ forward 0.00011
(0.85)
 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387 1383

Appendix
(continued)
3 (continued)
Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital ∗ horizontal 0.0032

(0.71)
Human capital ∗ backward 0.0108
(2.00)**
Human capital ∗ forward −0.0588
(−1.82)***
Financial development ∗ horizontal −0.0086
(−0.75)
Financial development ∗ backward 0.0065
(0.63)
Financial development ∗ forward −0.0087
(−0.33)
Time dummies Yes Yes Yes Yes
Industry dummies Yes Yes Yes Yes
Hansen test (p-value) 0.45 0.39 0.38 0.37
Durbin–Wu–Hausman (p-value) 0.00 0.00 0.00 0.00
Number of observations 465 465 465 465
R-squared 0.38 0.32 0.28 0.36

Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.

Appendix 4. The effect of FDI on TFP in North Central Coast

Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital [log(H)] 0.4797 0.6584 −0.5863 0.9498

(21.34)* (1.87)*** (−0.93) (2.23)**
Scale (S) 0.1383 −1.3827 3.3211 −3.0785
(0.13) (−0.62) (1.47) (−1.09)
Concentration (C) −0.3367 0.0173 0.2098 0.1061
(−2.67)* (0.12) (1.32) (0.46)
Technology gap (T) −0.0021 −0.0028 −0.0037 −0.0007
(−11.53)* (−2.27)** (−3.22)* (−0.71)
Horizontal FDI spillovers −0.0018 −0.0128 −2.2669 −0.4616
(−1.91)** (−0.08) (−1.85)*** (−1.71)***
Backward FDI spillovers −0.0060 −0.0075 0.0047 −0.0064
(−7.70)* (−8.18)* (1.15) (−3.12)*
Forward FDI spillovers 0.0043 0.0074 −0.0501 0.0085
(2.04)** (1.49) (−1.81)*** (1.64)***
Financial development (F) 0.9349 0.8135 0.9892 0.7537
(11.99)* (6.81)* (12.46)* (4.27)*
Technology gap ∗ horizontal −0.00002
(−0.41)
Technology gap ∗ backward 0.00012
(2.25)**
Technology gap ∗ forward −0.00028
(−1.40)
Human capital ∗ horizontal 0.0110
(1.69)***
Human capital ∗ backward −0.0062
(−2.80)*
Human capital ∗ forward 0.0346
(1.97)
Financial development ∗ horizontal 0.0087
(2.09)**
Financial development ∗ backward 0.0005
(0.16)
Financial development ∗ forward −0.0131
(−1.42)
Time dummies Yes Yes Yes Yes
Industry dummies Yes Yes Yes Yes
Hansen test (p-value) 0.55 0.19 0.16 0.12
Durbin–Wu–Hausman (p-value) 0.00 0.00 0.00 0.00
Number of observations 2987 2987 2987 2987
R-squared 0.43 0.43 0.34 0.34

Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.
1384 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387

Appendix 5. The effect of FDI on TFP in South Central Coast

Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital [log(H)] 1.3199 2.27651 9.4182 1.4996

(5.01)* (3.26)* (2.11)** (4.52)*
Scale (S) 19.2282 46.9831 76.0676 23.8597
(−3.32)* (2.46)** (2.03)** (2.98)*
Concentration (C) −0.4171 −1.1422 −6.0229 −0.6587
(−1.91)** (−2.36)** (1.93)*** (−2.12)**
Technology gap (T) −0.0008 −0.0015 0.0001 −0.0006
(−4.54)* (−0.89) (0.23) (−1.98)**
Horizontal FDI spillovers −0.0019 0.5698 18.7057 0.3917
(−1.78)*** (1.38) (1.91)*** (1.10)
Backward FDI spillovers 0.0021 0.0001 −0.0205 0.0019
(2.12)** (0.04) (−1.30) (0.79)
Forward FDI spillovers −0.0087 −0.0300 0.4149 0.0017
(−3.57)** (−2.92)* (1.97)** (0.36)
Financial development (F) 0.8172 0.5706 1.6669 1.4744
(10.65)* (3.18)* (4.19)* (7.37)*
Technology gap ∗ horizontal −0.0005
(−2.13)**
Technology gap ∗ backward −0.00001
(0.24)
Technology gap ∗ forward 0.0013
(2.36)**
Human capital ∗ horizontal −0.0915
(−1.94)***
Human capital ∗ backward 0.0121
(1.49)
Human capital ∗ forward −0.2405
(−2.00)**
Financial development ∗ horizontal −0.0105
(−1.80)***
Financial development ∗ backward −0.0002
(−0.06)
Financial development ∗ forward −0.0003
(−2.22)**
Time dummies Yes Yes Yes Yes
Industry dummies Yes Yes Yes Yes
Hansen test (p-value) 0.18 0.29 0.56 0.21
Durbin–Wu–Hausman (p-value) 0.00 0.00 0.00 0.00
Number of observations 3885 3885 3885 3885
R-squared 0.25 0.12 0.16 0.14

Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.

Appendix 6. The effect of FDI on TFP in Central Highlands

Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital [log(H)] 0.7480 0.5904 2.3187 0.8272

(2.35)* (1.39) (2.99)* (2.40)**
Scale (S) 5.0855 −0.4973 −5.7480 −10.6405
(0.31) (−0.03) (−0.52) (−0.66)
Concentration (C) −0.1886 −0.1021 0.0004 −0.2474
(−0.39) (−0.15) (0.11) (−0.42)
Technology gap (T) −0.0060 −0.0111 −0.0083 −0.0060
(−3.94)* (−2.92)* (−4.49)* (−3.10)*
Horizontal FDI spillovers 0.0037 −0.1436 5.1689 0.4214
(1.84)*** (−0.49) (2.99)* (0.96)
Backward FDI spillovers −0.0010 −0.0035 −0.0151 −0.0025
(−0.54) (−1.74)*** (−1.42) (−0.65)
Forward FDI spillovers −0.0051 0.0004 0.1011 0.0081
(−1.10) (0.05) (1.91)*** (0.92)
Financial development (F) 1.0561 1.1004 1.2021 1.5293
(9.38)* (8.97)* (9.47)* (6.25)*
Technology gap ∗ horizontal 0.0002
(1.70)***
Technology gap ∗ backward 0.0002
(1.88)***
Technology gap ∗ forward −0.0004
(−1.60)***
 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387 1385

Appendix
(continued)
6 (continued)
Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital ∗ horizontal −0.0238

(−2.85)
Human capital ∗ backward 0.0072
(1.34)
Human capital ∗ forward −0.0597
(−2.01)**
Financial development ∗ horizontal −0.0023
(−0.28)
Financial development ∗ backward 0.0008
(0.13)
Financial development ∗ forward −0.0260
(−1.52)
Time dummies Yes Yes Yes Yes
Industry dummies Yes Yes Yes Yes
Hansen test (p-value) 0.22 0.14 0.29 0.31
Durbin–Wu–Hausman (p-value) 0.00 0.00 0.00 0.00
Number of observations 1354 1354 1354 1354
R-squared 0.34 0.39 0.31 0.32

Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.

Appendix 7. The effect of FDI on TFP in South East

Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital [log(H)] 0.6994 0.7547 2.1076 1.6723

(5.71)* (1.78)*** (6.99)* (11.32)*
Scale (S) 1.2087 0.9034 1.6491 −3.2606
(1.85)*** (0.44) (3.85)* (−3.63)
Concentration (C) −0.1723 −0.1004 0.5606 0.0765
(−1.30) (−0.52) (2.44)* (0.43)
Technology gap (T) −0.0003 −0.0004 −0.0003 −0.0001
(−11.54)* (−1.45) (−2.06)** (−0.77)
Horizontal FDI spillovers −0.0051 −0.5525 4.9724 −1.4650
(−10.79)* (−8.15)* (4.63)* (−11.20)*
Backward FDI spillovers 0.0022 0.0027 0.0161 0.0114
(5.54)* (3.46)* (7.48)* (7.28)*
Forward FDI spillovers −0.0078 −0.0079 0.0230 −0.0163
(−9.01)* (−5.86)* (2.78)* (−6.40)*
Financial development (F) 1.0828 1.0737 1.1141 0.5483
(39.24)* (18.68)* (42.27)* (7.24)*
Technology gap ∗ horizontal 0.00004
(1.41)
Technology gap ∗ backward −0.00003
(−2.07)**
Technology Gap ∗ Forward 0.00001
(0.73)
Human capital ∗ horizontal −0.0216
(−5.07)*
Human capital ∗ backward −0.0057
(−6.84)*
Human capital ∗ forward −0.0154
(−3.93)*
Financial development ∗ horizontal 0.0152
(7.47)*
Financial development ∗ backward −0.0137
(−5.81)*
Financial development ∗ forward 0.0084
(2.18)**
Time dummies Yes Yes Yes Yes
Industry dummies Yes Yes Yes Yes
Hansen test (p-value) 0.28 0.51 0.92 0.16
Durbin–Wu–Hausman (p-value) 0.00 0.00 0.00 0.00
Number of observations 24,286 24,286 24,286 24,286
R-squared 0.43 0.44 0.31 0.26

Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.
1386 S. Anwar, L.P. Nguyen / Journal of Business Research 67 (2014) 1376–1387

Appendix 8. The effect of FDI on TFP in Mekong River Delta

Independent variables Dependent variable: log (TFP)

Estimation without Estimation with interaction Estimation with interaction Estimation with interaction
interaction between FDI spillover and H between FDI spillover and T between FDI spillover and F

Human capital [log(H)] 1.8812 1.9586 1.9339 1.7709

(16.48)* (15.72)* (3.55)* (14.92)*
Scale (S) 9.9852 13.4318 10.3396 11.0623
(6.17)* (2.68)* (1.95)** (2.60)*
Concentration (C) −0.3275 −0.4462 −2.3368 −0.2645
(−1.70)*** (1.83)*** (−1.58) (−1.21)
Technology gap (T) −0.0004 −0.0011 0.0049 −0.0010
(−1.15) (−1.86)*** (1.59) (−1.72)***
Horizontal FDI spillovers 0.0115 1.1771 1.7551 1.3946
(8.14)* (7.49)* (3.41)* (4.51)*
Backward FDI spillovers 0.0019 0.0009 0.0147 0.0079
(1.83)*** (0.88) (0.95) (3.50)*
Forward FDI spillovers −0.0411 −0.0415 0.1651 −0.0342
(−15.45)* (−14.86)* (2.22)** (−6.46)*
Financial development (F) 0.7001 0.6999 0.5823 1.2198
(10.95)* (10.79)* (2.53)** (8.03)*
Technology gap ∗ horizontal −0.00005
(−0.12)
Technology gap ∗ backward 0.00008
(1.66)***
Technology gap ∗ forward 0.00007
(0.09)
Human capital ∗ horizontal −0.3114
(−3.37)*
Human capital ∗ backward −0.0058
(−0.74)
Human capital ∗ forward −0.1177
(−2.81)*
Financial development ∗ horizontal −0.0037
(−0.68)
Financial development ∗ backward −0.0127
(−2.95)*
Financial development ∗ forward −0.0137
(−1.37)
Time dummies Yes Yes Yes Yes
Industry dummies Yes Yes Yes Yes
Hansen test (p-value) 0.68 0.18 0.36 0.21
Durbin–Wu–Hausman (p-value) 0.00 0.00 0.00 0.00
Number of observations 11,922 11,922 11,922 11,922
R-squared 0.27 0.23 0.35 0.32

Notes: (i) Robust t-statistics in parentheses; (ii) ***significant at 10%, **significant at 5%, and *significant at 1%.

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