3.2 Institutional Dynamics, Ownership Modes, and Technology Diffusion
Scholarly debate regarding foreign direct investment (FDI) centers on the specific mechanisms through which multinational corporations transmit technological capabilities to domestic manufacturing enterprises. Established empirical evidence indicates that knowledge diffusion operates predominantly across vertically related industries rather than within horizontal sectors, with positive productivity spillovers occurring through backward linkages where foreign affiliates interact directly with upstream domestic suppliers (Javorcik, 2004). However, the direct influence of foreign ownership structures remains contentious across the empirical literature. Javorcik (2004) demonstrates that positive productivity spillovers associate specifically with projects involving shared domestic and foreign ownership rather than fully owned foreign investments. In contrast, Du (2009) observes that local firms derive measurable learning benefits from both joint ventures and wholly owned foreign subsidiaries, with wholly owned foreign affiliates generating comparatively larger effects when domestic plants possess high absorptive capacity and substantial in-house research capital. Despite these foundational insights, a distinct research gap persists concerning how preferential trade agreements, such as the EVFTA, interact with subnational industrial agglomerations to reshape supplier upgrading dynamics. Prevailing literature frequently treats recipient countries as geographically and institutionally uniform, thereby overlooking how spatial proximity to multinational production networks mediates the compliance burdens of origin rules. Additionally, this analysis faces analytical limitations arising from reliance on cross-sectional linkage metrics that obscure the temporal evolution of tier-two and tier-three domestic supplier integration. Addressing these empirical boundaries is necessary to explain why supplier modernization trajectories diverge substantially across regional manufacturing corridors.