Joining multinationals’ supply chains can benefit domestic firms’ performance

Developing countries compete to attract multinationals to induce development. Becoming suppliers to multinationals could improve domestic firms’ technology and managerial practices, and the host country’s economy could benefit. However, evidence to support this has been scarce. Using administrative data on firm-to-firm transactions from Costa Rica, Alonso Alfaro-Urena, Isabela Manelici and Jose P Vasquez find that first-time suppliers to multinationals in manufacturing and services tend to experience substantial, long-lasting performance improvements.