How FDI origin and heterogeneity shape productivity spillovers among Vietnamese domestic firms

This study investigates the effects of horizontal and backward FDI spillovers, disaggregated by investors’ countries of origin, on the total factor productivity (TFP) of domestic firms in Vietnam during the period 2009–2018. Drawing on firm-level data from the Vietnamese Enterprise Survey and input–output tables, we estimate TFP using the Levinsohn-Petrin methodology. To identify the impacts of horizontal and backward linkages, a range of econometric estimators is employed. The empirical findings reveal that capital intensity, at both the firm and industry levels, together with firm size, constitutes the primary source of productivity disparities between the most and least productive firms. Furthermore, industry-specific factors, including FDI spillovers and supplier-customer linkages, also contribute to productivity differences. However, these effects become substantially more pronounced when foreign investments are distinguished by their countries of origin. This finding highlights the heterogeneous nature of FDI spillovers, suggesting that the productivity effects of foreign investment vary across source countries and that not all foreign investments generate adverse spillover effects for domestic firms.