The impact of multinational enterprise strategy on indigenous enterprises: Horizontal spillovers and crowding out in developing countries

Under what conditions does a multinational enterprise's (MNE's) investment in a developing country produce spillovers for local firms operating in the same industry? In this paper I view firms as unique configurations of tacit and codified knowledge, and I propose that the strategies pursued by an MNE will determine whether the investment will create positive externalities, through knowledge diffusion and provision of public goods, or negative externalities, through a crowding out effect on indigenous enterprises.