FDI and superstar spillovers: evidence from firm-to-firm transactions

Using firm-to-firm transactions, we show that starting to supply a ‘superstar’ firm (large domestic firms, exporters and multinationals) boosts productivity by 8% after three years. Placebos on starting relationships with smaller firms and novel identification strategies support a causal interpretation of “superstar spillovers”. Consistent with a model of technology transfer, we find bigger treatment effects from technology-intensive superstars and also falls in markups (in order to win superstar contracts). We also show that firms that start supplying superstar firms enjoy a ‘dating agency’ effect — an increase in the number of new buyers that is particularly strong within the superstar firm’s network. Taken together, the results suggest an important role for raising productivity through superstars’ supply chains regardless of multinational status.