Skip to content

Spillover

: 9

"Spillover" refers to the unintended or indirect effects of an activity, policy, or event that extend beyond its original scope or boundaries, often impacting other areas or sectors.

Spillover effects can be considered a type of network effect, particularly in contexts where interactions or connections between entities lead to the diffusion or transmission of effects. Network effects occur when the value or utility of a product, service, or activity increases as more individuals or entities participate or interact within a network.

In the case of spillover effects:

  1. Positive Spillover: When positive effects spread across a network, such as knowledge spillovers in research or economic spillovers in business clusters, it can enhance the value or utility of the network as a whole. As more individuals or entities benefit from these positive spillovers, the overall network becomes more valuable and attractive.
  2. Negative Spillover: Conversely, negative effects can also spread through networks, leading to adverse outcomes for interconnected entities. For example, environmental pollution or financial contagion can propagate through networks, causing harm to ecosystems or financial markets.

In both cases, the presence of spillover effects influences the dynamics of the network, shaping interactions between participants and affecting the overall performance or stability of the system. Therefore, spillover effects can indeed be viewed as a form of network effect, contributing to the interconnectedness and complexity of networks across various domains.

In various contexts, "spillover" can have different meanings:

  1. Economic Spillover: In economics, spillover refers to the positive or negative effects that an economic activity or investment has on surrounding businesses, industries, or regions. For example, a new factory opening in a particular area may generate economic spillover effects by creating jobs, boosting local demand for goods and services, and stimulating investment in related industries.
  2. Environmental Spillover: In environmental science, spillover refers to the unintended environmental consequences of human activities, such as pollution, habitat destruction, or ecosystem disruption, which can affect neighboring ecosystems or populations.
  3. Knowledge Spillover: In innovation and research, knowledge spillover occurs when knowledge generated through research, development, or technological innovation spills over to other individuals, organizations, or industries, leading to broader societal benefits or technological advancements.
  4. Social Spillover: In sociology and psychology, social spillover refers to the transfer or diffusion of attitudes, behaviors, or cultural norms from one group or context to another. For example, positive behaviors exhibited by individuals may inspire others to adopt similar behaviors, leading to a social spillover effect.
  5. Financial Spillover: In finance, spillover refers to the transmission of financial shocks or disturbances from one market, asset class, or country to another, leading to interconnectedness and contagion effects in the global financial system.

Transnational Corporations (TNC)

Transnational Corporations (TNC) should be Left Alone → Well; used TNC to improve your productive ecosystem (in a real way - absorption → innovation)

  • Policymakers believe the main target of government policies should be Thai-owned firms, especially SMEs. Beyond providing tax incentives to attract investment to bring in foreign exchanges and generate employment, TNCs should be left alone as they confine R&D and innovative product designs at home, and all their important decisions are made at their headquarters. These assumptions are less true these days. Unlike portfolio equity investment, TNCs are considered less “footloose” (Rasiah, 1995).
  • Incorporate TNC and their subsidiaries as part of the productive ecosystem- ensuring they have relations with the locals - and also share R&D and knowledge flow between countries. Ensure those innovations are also valid for developing markets and not just mare adaptations for local poverty😂.
  • Like Malaysia and Thailand, Singapore is another country where TNCs have figured prominently in economic development.
  • Singapore government has put in place specific measures to attract FDI and encourage TNCs via incentives to assist in developing local technological capabilities.
  • More interestingly, several studies (Rasiah, 1995; Ariffin and Bell, 1999; Marin and Bell 2006; Hobday and Rush 2007) point out that subsidiaries of TNCs in several countries such as the electronics industry in Malaysia and Thailand, have more autonomy in decision making than popularly believed.
  • The local Industry Upgrading Programme implemented by Singapore’s Economic Development Board (EDB), for instance, aims explicitly at exploiting TNCs’ knowledgeable and experienced engineers to train employees of local firms in developing skills considered ‘critical’ for technologically upgrading high-priority industrial sectors (see Wong, 1999).
    • As an incentive, the EDB subsidized a percentage of the salary of managers sent by TNCs to work in local enterprises for two years. As of 2010, more than 200 TNCs and 1000 local suppliers have been involved in this programme (Wong and Singh, 2012).
  • Singapore has also attempted to attract TNCs to set up regional R&D centres since the 1980s.
  • If rightly formulated and implemented, the policies of host countries can influence TNCs to invest in technologically sophisticated activities to create positive impacts on local economies.
  • Rasiah, R. (1995) Foreign Capital and Industrialization in Malaysia, Basingstoke: Macmillan.
  • Hobday, M. and Rush, H. (2007) “Upgrading the Technological Capabilities of Foreign Transnational Subsidiaries in Developing Countries: The Case of Electronics in Thailand”, Research Policy, 36: 1335–1356
  • Marin, A. and Bell, M. (2006) “Technology Spillovers from Foreign Direct Investment: An Exploration of the Active Role of MNC Subsidiaries in The Case of Argentina in the 1990s”, Journal of Development Studies, 42(4): 678-697
  • …

References

  • Marin, A. and Bell, M. (2006) “Technology Spillovers from Foreign Direct Investment: An Exploration of the Active Role of MNC Subsidiaries in The Case of Argentina in the 1990s”, Journal of Development Studies, 42(4): 678-697
  • Intarakumnerd, Patarapong, Nathasit Gerdsri, and Pard Teekasap. "The roles of external knowledge sources in Thailand's automotive industry." Asian Journal of Technology Innovation 20.sup1 (2012): 85-97.
  • Bottazzi, L., & Peri, G. (2003). Innovation and spillovers in regions: Evidence from European patent data. European economic review, 47(4), 687-710.