Knowledge spillovers through inward FDI in emerging markets: an empirical examination in the supermarket industry

Abstract

This study sets out to determine the mechanisms of intra-industry knowledge spillovers from inward FDI in the service sector of an emerging economy. Upon the basis of survey data from a local supermarket in South Korea, the study indicates that a demonstration effect is an efficient channel of knowledge flows from MNE subsidiaries to local firms. Worker mobility and local firms' absorptive capacity also play important roles in learning foreign knowledge in the perspective of local organisations, although the impact is somewhat marginal. Competitive pressure, however, does not exhibit any significant association with knowledge spillovers. This paper contributes to a concept, competitive dynamics, by shedding light on mechanisms of horizontal knowledge spillovers among actors within a strategic group. Some practical implications for managers of MNEs and local firms are also suggested.