Energy efficiency gains from multinational supply chains: evidence from Turkey

This paper examines whether multinational supply chains improve energy efficiency in domestic firms. Our theoretical model predicts that foreign firms in upstream manufacturing and energy sectors increase the availability of high‐quality inputs, reducing energy intensity in downstream domestic firms. We test these predictions using data on Turkish manufacturing firms from 2010 to 2015. We find that domestic firms in sectors more likely to source manufacturing and energy inputs from foreign suppliers exhibit lower energy intensity. Results are robust to numerous sensitivity checks, including controls for firms' outsourcing and vertical‐integration strategies, and are supported by an instrumental‐variable approach. Consistent with the model, foreign presence in upstream sectors improves input quality, a key channel through which foreign direct investment enhances downstream firms' energy efficiency.