TECHNOLOGY SPILLOVERS AND FOREIGN DIRECT INVESTMENT IN SINGAPORE : AN EMPIRICAL STUDY ON THE SOURCES OF MANUFACTURING PRODUCTIVITY GROWTH

Abstract

The objective of this thesis is to study technological spillovers from the Multinational Corporations (MNCs) to the local manufacturing industries in Singapore. Two forms of technology spillovers are examined: (a) spillovers from the affiliates of the MNCs to the locally owned firms and (b) spillovers from the parent MNCs to their affiliates in Singapore's manufacturing sector. Using total factor productivity growth as a proxy for technical progress, the presence of technology spillovers is investigated using econometric analysis. The results suggests that there are no technology spillovers from the affiliates of the MNCs to the wholly locally owned firms while there are significant technology spillovers from the affiliates to mostly locally owned firms. The higher concentration of mostly locally owned firms in the high value-added industries, their larger size, higher capital intensity, and joint venture activities within this group of firms are identified as possible explanations for this result. The second set of results suggests that there are no technology spillovers from the parent MNCs to their affiliates in Singapore. However, export­ induced learning-by-doing has been identified as a very significant source of technical progress in MNCs' affiliates. Finally, the findings support the Government's policies to provide financial and technical assistance to locally owned firms and to upgrade the education and training system of the local workforce as these policies can potentially contribute very much to increasing technology spillovers