The Effects of Joining Multinational Supply Chains: New Evidence from Firm-to-Firm Linkages

Abstract We study the effects of becoming a supplier to multinational corporations (MNCs) using tax data tracking firm-to-firm transactions in Costa Rica. Event estimates reveal that domestic firms experience strong and persistent gains performance after supplying first MNC buyer. Four years after, employ 26% more workers have 4% 9% higher total factor productivity (TFP). These are unlikely be explained by demand or changes compliance. Moreover, suppliers large drop their sales all other buyers except buyer year event, followed gradual recovery. The dynamics adjustment others suggests face short-run capacity constraints relax over time. later, grow 20%. Most this growth comes from acquisition new buyers, which tend “better buyers” (e.g., larger with stable relationships). Finally, we collected survey MNCs provide further insights into wide-ranging benefits MNCs. According our surveys, these range better managerial practices reputation.