Liquidity Constraints and Linkages with Multinationals

26 Pages Posted: 18 Dec 2008

See all articles by Beata Smarzynska Javorcik

Beata Smarzynska Javorcik

University of Oxford - Department of Economics

Mariana Spatareanu

Rutgers University Department of Economics and Division of Global Affairs

Date Written: November 2008

Abstract

Using a unique data set from the Czech Republic for 1994-2003, this study examines the relationship between a firm's liquidity constraints and its supply linkages with multinational corporations (MNCs). The empirical analysis indicates that Czech firms supplying MNCs are less credit constrained than non-suppliers. A closer inspection of the timing of the effect, however, suggests that this result is due to less constrained firms self-selecting into becoming MNC suppliers rather than the benefits derived from the supplying relationship. As recent literature finds that productivity spillovers from foreign direct investment (FDI) are most likely to take place through contacts between MNCs and their local suppliers, our finding suggests that well-developed financial markets may be needed in order to take full advantage of the benefits associated with FDI inflows.

Keywords: cash flow, FDI spillovers, foreign direct investment, liquidity constraints

JEL Classification: F21, F23, F36

Suggested Citation

Smarzynska Javorcik, Beata and Spatareanu, Mariana, Liquidity Constraints and Linkages with Multinationals (November 2008). CEPR Discussion Paper No. DP7058, Available at SSRN: https://ssrn.com/abstract=1311182

Beata Smarzynska Javorcik (Contact Author)

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Mariana Spatareanu

Rutgers University Department of Economics and Division of Global Affairs ( email )

360 ML King Jr. Blvd.
Newark, NJ 07102
United States
973 353 5249 (Phone)
973 353 5819 (Fax)

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