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Good practice Imported

Joining Multinational Supply Chains — Costa Rica's Evidence-Based Supplier-Linkage Push

Costa Rica · Heredia · See the Costa Rica profile · See the Heredia profile

Evidence: Quasi-experimental Top 66% 62/100 · Ask Evidence Copilot about this practice

Two decades of firm-to-firm tax records show Costa Rican firms that start supplying a multinational buyer add 26% more workers and 4–9% higher productivity within four years — evidence behind PROCOMER's Encadenados supplier-linkage programme.

+26%
Employment growth after first multinational sale (within 4 years)
+4-9%
Total factor productivity growth after first multinational sale (within 4 years)
+20%
Growth in sales to non-multinational customers (post-linkage)
Joining Multinational Supply Chains — Costa Rica's Evidence-Based Supplier-Linkage Push

Details

Maturity
Established
Promoter
PROCOMER (Foreign Trade Promotion Corporation of Costa Rica)
Period
2015–2022 (study period); PROCOMER's Encadenados supplier-linkage programme ongoing
Keywords
manufacturing, foreign direct investment, supply chain development, SME growth

Context

Costa Rica has attracted substantial foreign direct investment, but it was unclear how much domestic manufacturers actually gained from starting to supply the multinationals operating in its export-processing zones.

Objectives

Economists Alonso Alfaro-Ureña, Isabela Manelici and José P. Vasquez used two decades of Costa Rican tax-authority firm-to-firm transaction records to trace what happens to a domestic firm the moment it starts selling to a multinational buyer, comparing firms just before and after they land that first multinational client.

Activities

PROCOMER, Costa Rica's state trade and investment promotion agency, cites these findings as the rationale for its ongoing supplier-development work, including the Encadenados matchmaking conference run with the free-trade-zone business association AZOFRAS to connect domestic manufacturers with multinational buyers in export-processing zones around Heredia and the Greater Metropolitan Area.

Results

Firms that land a first multinational buyer see employment rise by 26% and total factor productivity rise 4-9% within four years, effects unlikely to be explained by demand shifts or tax-compliance changes alone; the gains spread further, with these firms' sales to other, non-multinational customers growing by an additional 20% as the new relationship builds capabilities, reputation and referrals.

Conclusions

Firm surveys point to concrete mechanisms behind the gains -- new managerial practices, quality-certification requirements and reputational spillovers -- but the design is quasi-experimental rather than a randomised trial, so the authors cannot fully rule out that the most capable firms are also the most likely to be selected as suppliers, even though pre-trends were flat before the first sale.

Implementation

Indicative cost
Low (< €50k) — Supplier-development work (matchmaking events, aftercare services) is funded as a standing part of PROCOMER's core agency budget, not a large capital programme.
Time to results
Medium (1–3 years) — Measured productivity and employment gains persist at least four years after a firm's first multinational sale; PROCOMER's Encadenados programme runs on an ongoing basis.
Staffing & skills
PROCOMER programme staff running the Encadenados matchmaking conference, AZOFRAS (free-trade-zone business association) as co-organiser, academic research team (Alfaro-Ureña, Manelici, Vasquez) analysing tax-authority transaction data

Conditions for success

  • Access to comprehensive firm-to-firm tax transaction data enables rigorous before/after measurement of supplier linkages
  • An active matchmaking channel (Encadenados) connecting domestic manufacturers directly with multinational buyers
  • Standing institutional mandate within PROCOMER's core budget rather than a time-limited donor project

Common failure modes

  • The quasi-experimental design cannot fully rule out that more capable firms are also more likely to be selected as suppliers in the first place
  • The study documents outcomes for Costa Rica only; independent replication of the same rigour elsewhere was not found

Where it fits

Governance type
national trade-promotion agency (PROCOMER) partnering with a business association (AZOFRAS)
Scale
national, concentrated around export-processing zones near Heredia and the Greater Metropolitan Area
Income level
upper-middle-income country with substantial FDI

Commonly funded by

National / regional programmes

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Data sources

Where this practice's information was retrieved from, and when.

Attachments

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