Foreign firms boost productivity of local businesses, especially small enterprises.
Foreign investment can help local companies grow and improve technology. A study in Vietnam looked at how being close to foreign firms affects local businesses. They found that being near foreign companies can boost productivity for domestic firms, especially small and medium-sized ones. The effects are strongest within 2 to 10 kilometers and decrease further away. Also, connections with other local manufacturing companies can help, but links with foreign service firms have less impact.