Exposure to FDI and new plant survival: evidence in Canada


  • Yanling Wang is also affiliated with the School of Economics, Henan University, China. I wish to thank Dr John Baldwin, Director of the Economic Analysis Division (EAD) at Statistics Canada for granting me access to the Canadian plant-level data during 2008–2010. Special thanks go to researchers in EAD for sharing the Trefler tariff data set with me and for providing the hospitality. Since the revision came after I left Statistics Canada and the rules were changed for access to data, Dr Danny Leung from EAD was assigned to be my manager who helped me greatly in the revision. He merged the tariff data set with the plant-level data and helped run the programs for the endogeneity analysis and other related work with professionalism and efficiency. I also benefited greatly from comments by and discussions with Wulong Gu, Marcel Voia, Chi Wan, and Frances Woolley. The comments and suggestions from two anonymous referees and the handling co-editor have improved the paper significantly. Email: Yanling_Wang@carleton.ca


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.


Ce mémoire examine les effets de l’investissement direct de l’étranger (IDE) sur la survie des nouveaux établissements domestiques, via une analyse des liens économiques intra et interindustriels. On examine tous les établissements manufacturiers engendrés par les firmes domestiques entre 1973 et 1997 au Canada. L’étude montre que les nouveaux établissements domestiques tendent à avoir des vies plus courtes (plus de mortalité) à cause de la concurrence des succursales d’intérêts étrangers opérant dans l’industrie, mais qu’ils bénéficient des succursales étrangères opérant dans des industries en aval en tant que consommateurs et en amont en tant que fournisseurs. Les effets interindustriels positifs de l’investissement direct de l’étranger sont plus grands que les effets intraindustriels négatifs, ce qui aboutit à un effet positif net de l’investissement direct de l’étranger sur la durée de vie des établissements domestiques.