FDI spillovers in Russia: YIT in the Russian construction market
Pekki, Anna (2016-12-13)
FDI spillovers in Russia: YIT in the Russian construction market
Pekki, Anna
(13.12.2016)
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Turun yliopisto. Turun kauppakorkeakoulu
Kuvaus
siirretty Doriasta
Tiivistelmä
Nowadays foreign direct investment (FDI) can be considered as an important channel for different knowledge, capital, and technology to be transferred from one country to another. It is often seen as a tool for economic development in the host countries. In addition, to the direct effects of FDI to the host economy, such as tax revenues, capital formation, imports and exports, there are also indirect effects that can be called external effects or spillovers which may take place. These spillovers may occur across industries (inter-industry spillovers) or inside an industry (intra-industry spillovers).
The purpose of this study is to increase the overall understanding of the potential positive or negative FDI spillovers to the local firms that can be detected in the host country. The sub-objectives are as follows:
• What spillovers can be detected across industries
• What spillovers can be detected inside an industry?
The FDI externalities are analyzed through a theoretical framework developed by Pelto (2013). This study was conducted using a qualitative approach and a case study was chosen as a method for analysis. The empirical evidence was collected through two semi-structured interviews with two companies. YIT was chosen as a foreign company operating in Russia, and VISKO, a subcontractor of YIT, was also chosen for the interview.
The findings suggest that different FDI spillovers can be detected both inside and across industries. Competition effect is found to be especially important in FDI spillover occurrences. Both negative and positive effects were found to take place. In some situations foreign companies can downgrade to a local company’s level, thus lowering its quality. However, more often foreign firms give a push to local companies through increased competition. Furthermore, the findings suggest that foreign firms may increase efficiency of local subcontractors. In addition, foreign companies are found to have significantly more rules and requirements, such as quality requirements, than their local counterparts. Especially in the long run these rules and requirements bring benefits for local subcontractors.
This study presents new practical insights for FDI spillovers. It provides guidelines for domestic companies to recognize and distinguish different FDI spillovers and benefit from them. Further research is, however, needed in order to gain an understanding of how and why these spillovers occur.
The purpose of this study is to increase the overall understanding of the potential positive or negative FDI spillovers to the local firms that can be detected in the host country. The sub-objectives are as follows:
• What spillovers can be detected across industries
• What spillovers can be detected inside an industry?
The FDI externalities are analyzed through a theoretical framework developed by Pelto (2013). This study was conducted using a qualitative approach and a case study was chosen as a method for analysis. The empirical evidence was collected through two semi-structured interviews with two companies. YIT was chosen as a foreign company operating in Russia, and VISKO, a subcontractor of YIT, was also chosen for the interview.
The findings suggest that different FDI spillovers can be detected both inside and across industries. Competition effect is found to be especially important in FDI spillover occurrences. Both negative and positive effects were found to take place. In some situations foreign companies can downgrade to a local company’s level, thus lowering its quality. However, more often foreign firms give a push to local companies through increased competition. Furthermore, the findings suggest that foreign firms may increase efficiency of local subcontractors. In addition, foreign companies are found to have significantly more rules and requirements, such as quality requirements, than their local counterparts. Especially in the long run these rules and requirements bring benefits for local subcontractors.
This study presents new practical insights for FDI spillovers. It provides guidelines for domestic companies to recognize and distinguish different FDI spillovers and benefit from them. Further research is, however, needed in order to gain an understanding of how and why these spillovers occur.