Exposure to FDI and New Plant Survival: Evidence in Canada

Abstract

This paper examines the effects of FDI on indigenous new plants' survival, through intra- and inter-industry economic linkages. It includes all manufacturing plants born to indigenous firms from 1973 to 1997 in Canada. The study finds that indigenous plants tend to have shorter lives (more deaths) due to competition with FDI affiliates operating in the same industry, but they benefit from FDI affiliates operating both in downstream industries as customers and in upstream industries as suppliers. The positive inter-industry effects of FDI outweigh the negative intra-industry effects, resulting in a net positive impact of FDI on the durations of indigeneous plants.