has mastered the entire product cycle of R&D, innovation, design, development, production and marketing under its own brand. This sequential OEM-ODM-OBM path has been labeled the conventional model of _supplier oriented industrial upgrading_ . (Sturgeon and Lester, 2004).<sup>9</sup> Samsung Electronics of Korea is a rare example of a developing country firm that has successfully traveled the whole of this road, building on OEM and technology licensing deals with advanced country MNCs like Sony, Toshiba, Philips and GTE in the 1980s, making huge efforts to build up its design capabilities, R&D and independent brand in the 1990s, till the present, when it has annual R&D expenditures of $4-5 billion (representing 8-9 percent of sales and employing close to a quarter of the workforce), and has the largest global market share for sales of DRAM and SRAM semiconductors, flash memories, TVs, monitors and LCD panels, as well as the second or third largest market shares for mobile phones and DVD players.<sup>10</sup> Nevertheless, while the case study literature has stressed the opportunities for learning through exports, econometric evidence for this proposition is mixed.<sup>11</sup> There is certainly evidence that firms that export generally have significantly higher productivity than those that do not. But this appears to be mainly the result of self selection by more productive firms, which are more likely to undertake the higher fixed costs and rigors of competing in international markets. Clerides, Lach and Tybout (1998), for example, find little evidence for learning effects from exports in plant level data from Colombia, Mexico and Morocco. On the other hand, Kraay (2006) and Aw, Chen and Roberts (1997) do find some evidence that past export experience does help explain current productivity for Chinese and Taiwan (China) firms respectively.

Seeking to explain the somewhat differing results of econometric and case studies, Pack (2006) observes that export data do not typically distinguish exports under long term OEM contracts from other types of exports, so it is perhaps not surprising that econometric studies based on generic export data arrive at only mixed results for export learning effects. There is however a good deal of recent econometric evidence for the existence of technology transfers from multinational firm affiliates in a host country to their local suppliers in the same host country (discussed below). Given this evidence for one form of supplier-oriented industrial upgrading, it may be reasonable to suggest that similar spillovers would also exist for another, that is, for cross-border trade carried out under long term OEM type contracts between an MNC purchaser abroad and developing country OEM exporter firms which are a part of its global production network.

Tybout (2006) also notes that many studies of export learning effects fail to take into account the possibility that future exporters may come into contact with and cooperate with potential foreign customers well _before_ export flows actually take place. Kim (1997) describes Samsung’s efforts to master production of microwave ovens in the 1970s in response to a prospective order from J.C. Penney, with improvements in productivity preceding actual export flows. This and other case studies suggest that the relationship between exports and productivity is not simply a self-selection story, but also one in which firms make deliberate decisions to improve their productivity in order to serve export markets. Hallward-Driemer, Iarossi and Sokoloff (2002) provide firm level evidence for this hypothesis from five East Asian economies.

> 9 Benefits drawn by developing country firms which act as suppliers to local affiliates of foreign multinationals are another form of supplier-oriented industrial upgrading, a point returned to in the discussion of vertical FDI spillovers below.

> 10 Data for 2004.

> 11 The relevant literature is surveyed in Hoekman and Smarzynska-Javorcik (2006) and Tybout (2006).

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