The Role of the Heterogeneity of Services in the Transmission of Spillovers to Domestic Manufacturing Companies

The paper analyses how foreign multinational enterprises (MNEs) in service sector impact domestic manufacturing companies. We argue that the impact on the productivity of local upstream and downstream companies differs due to the heterogeneity of services. We investigate a sample of foreign MNEs located in Italy, finding that: (i) local suppliers enjoy positive spillovers from MNEs in highly innovative services; (ii) local customers enjoy positive spillovers from MNEs in service sector that stimulate interactions and generate redeploy able knowledge; (iii) suppliers and customers with higher absorptive capacity enjoy higher benefits from MNEs in service sectors whose internationalization process is at an early stage. Our findings confirm that indirect effects come from countervailing forces associated to intra-industry spillovers, whose net effect depends on the characteristics of the services considered.