Role of Foreign and the Economic Development of Thailand

Abstract

The purposes of this research were to examine the impact of FDI on the productivity of firms in Thailand's manufacturing industry from 2001 to 2003. The full sample consists of 11,851 observations including 4,342 observations in year 2001, 3,988 observations in year 2002, and 3,521 observations in year 2003. Methodology used to examine the impact of FDI with regard to the productivity of firms in Thailand's manufacturing industry. The methodology begins with a definition of framework of analysis, followed by the construction of the model. The data used in this research were unpublished data obtained directly from the office of Industrial Economics (OIE), Ministry of Thailand industries.

The results of the research found that the significant evidence of a positive FDI effect with regard to the transfer of technology. This was true for both those firms who were direct FDI recipients and those whom the study has focus on the firms who can benefit from the technology spillover effect within Thailand's manufacturing industry. The magnitude of this spillover effect depends a number characteristics of the individual firms that include areas such as size, export orientation, and technology level of domestic firm, the results of the study suggest that small, domestic-oriented and low technology domestic firms were the groups that benefit the most from the present of foreign firm. The magnitude or degree of both the positive and the negative spillover varies according to the measure of foreign presence and specifications of the model. The study makes a clear statement that domestics firms with the capacity to access modern technology through other channels do not rely much on the spillover from FDI. By contrast, domestic firm with lover levels of performance can benefit from with lover levels of performance can benefit from the presence of foreign firms in the domestic market. The study concludes that the entry of foreign firms to the domestic market does provide a channel for domestic firms with lower capabilities to benefit from technological spillover.