FDI productivity spillovers and the technology gap in Malaysia's electrical and electronic industries

Noor Aini Khalifah, Salmah Mohd Salleh, Radziah Adam

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

This study measures the impact of indirect technology transfer through spillovers from foreign direct investment (FDI) on Malaysia's development of a 'high-tech' sector, namely the electrical and electronic (E&E) industries. We estimate the total factor productivity (TFP) of establishments as a function of foreign presence within and across industries. Both the fixed assets and wages share of foreign establishments in a five-digit ISIC (International Standard Industrial Classification) industry are used as measures of foreign presence. The estimations provide evidence of significantly negative (or insignificant) FDI vertical spillover effects and insignificant horizontal spillover effects on the TFP of domestic establishments. The positive (negative) coefficient of the interaction term between the forward (horizontal) spillover variable and the technology gap supports the 'catching-up' (technology accumulation) hypothesis. The negative impact, even absence, of FDI spillover effects on TFP and the mixed evidence on the effects of interactions between FDI spillovers and the technology gap suggest that fine-tuning of fiscal incentive schemes for FDI to arrive at positive net benefits may prove to be a daunting task in the Malaysian E&E industries.

Original languageEnglish
Pages (from-to)142-160
Number of pages19
JournalAsian-Pacific Economic Literature
Volume29
Issue number1
DOIs
Publication statusPublished - 1 May 2015

Fingerprint

investment productivity
electrical industry
electronics industry
foreign direct investment
direct investment
foreign investment
Malaysia
spillover effect
total factor productivity
productivity
industry
technology transfer
interaction
wage
evidence
incentive
assets
Productivity spillovers
Foreign direct investment
Electronics industry

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Economics and Econometrics

Cite this

FDI productivity spillovers and the technology gap in Malaysia's electrical and electronic industries. / Khalifah, Noor Aini; Mohd Salleh, Salmah; Adam, Radziah.

In: Asian-Pacific Economic Literature, Vol. 29, No. 1, 01.05.2015, p. 142-160.

Research output: Contribution to journalArticle

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