The productivity advantage of MNEs may spill over to local firms for a number of reasons.First, domestic plants may be able to improve productivity by imitating production or management practices in foreign firms. Second, workers who move from a foreign-owned to a domestic plant may contribute to transfer knowledge of modern production and management practices to their new employers. Third, spillovers may occur from foreign firms to domestic firms in the supply chain, as foreign firms may collaborate with domestic suppliers to ensure that quality standards of intermediate inputs are met and that labour practices correspond with their codes of conduct. Finally, FDI may increase productivity in domestic firms when more intense product-market competition encourages local firms to remove inefficiencies in the production process.