Abstract: Many countries strive to attract foreign direct investment (FDI) in the hope that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In contrast with earlier literature that failed to find positive intra-industry spillovers from FDI, this study focuses on effects operating across industries. The analysis, based on a firm-level panel data set from Lithuania, produces evidence consistent with positive productivity spillovers from FDI taking place through contacts between foreign affiliates and their local suppliers in upstream sectors. The data indicate that such spillovers are associated with projects with shared domestic and foreign ownership but not with fully owned foreign investments. There is no indication of spillovers occurring within the same industry or through domestic firms sourcing inputs from multinationals.

I discuss the concept and empirical importance of intemational technology diffusion from the point of view of recent work on endogenous technological change. In this literature, technologyis viewed as technological knowledge. I first review the maj or concepts, and how intemational technology diffusion relates to other factors affecting economic growth in open economies. The following main section of the paper provides a review of recent empirical results on (i) basic results in intemational technology diffusion; (ii) the importance of specific channels of diffusion, in particular trade and foreign direct investment; (iii) the spatial distribution of technological knowledge, and (iv) other issues.

Why do some firms create more knowledge than others? This question is typically answered in macro and industrial-organization literatures with reference to a production-function model in which new ideas spring from the interaction of researchers and the existing stock of knowledge. But there is very little empirical evidence on production functions for new ideas. In this paper we estimate knowledge production functions for a cross-section of U.K. firms covering their operations from 1998 through 2000. We focus in particular on the hypothesis from the trade literature that globally engaged firms—either multinationals or exporters—have access to larger knowledge stocks. We find that globally engaged firms do generate more ideas than their purely domestic counterparts. This is not just because they use more researchers. Importantly, it is also because they have access to a larger stock of ideas through two main sources: their upstream and downstream contacts with suppliers and customers, and, for multinationals, their intra-firm worldwide pool of information.

This paper documents an unusual and possibly significant phenomenon: the export of skills embodied in goods, services, or capital from poorer to richer countries. We first present a set of stylized facts. Using a measure that combines the sophistication of a country’s exports with the average income level of destination countries, we show that the performance of a number of developing countries, notably China, Mexico, and South Africa, matches that of much more advanced countries, such as Japan, Spain, and the United States. Creating a new combined dataset on foreign direct investment (FDI) (covering greenfield investments as well as mergers and acquisitions) we show that flows of FDI to Organization for Economic Cooperation and Development (OECD) countries from developing countries like Brazil, India, Malaysia, and South Africa as a share of their GDP are as large as flows from countries like Japan, Korea, and the United States. Then, taking the work of Hausmann et al. (2007) as a point of departure, we suggest that it is not just the composition of exports but their destination that matters. In both cross-sectional and panel regressions, with a range of controls, we find that a measure of uphill flows of sophisticated goods is significantly associated with better growth performance. These results suggest the need for a deeper analysis of whether development benefits might derive not from deifying comparative advantage but from defying it.

Foreign direct investment, spillovers and absorptive capacity:Evidence

Abstract: This paper addresses three questions: (i) Are multinational firms (MNCs) really better than markets at transferring knowledge across borders? (ii) How actively do MNCs exchange knowledge with their host countries? (iii) Do they contribute as much to local knowledge as they learn from their host countries? To answer these questions, I analyze data on citations for over half a million patents from 4,400 firms and organizations from six countries, covering all manufacturing sectors. I estimate the probability of individual knowledge flows, as measured using patent citations, through a weighted maximum likelihood estimation approach for choice-based samples. Cross-border knowledge flows within the same MNC are found to be several times stronger than those between different entities even within the same country. Interestingly, these intra-MNC flows are equally strong in both directions between the home base and the foreign subsidiaries. Turning to intra-national knowledge flows, foreign MNC subsidiaries learn more from domestic entities than they contribute to host country knowledge, though this pattern differs across countries and industries. Knowledge flows from host countries to MNCs are in fact as strong as those between domestic entities, showing that MNC subsidiaries are not disadvantaged by their foreign affiliation. Finally, parent firms of MNCs with a higher fraction of innovative activity located abroad also learn more from other countries, suggesting

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This paper is about the role of MNE subsidiaries in the generation of knowledge and linkages in industrialising countries. It develops an original typology of MNE subsidiaries based on the nature of their global linkages. Then, it explores how this typology is connected with different mental models of MNE’s and discusses the impact of these two aspects on intra-subsidiary innovative activity and the formation of knowledge linkages at the local level – two important dimensions affecting subsidiaries ’ capacity to generate knowledge spillovers in host countries. Based on Argentinean data, the empirical analysis suggests that MNE subsidiaries engage in very diverse types of global networking. More specifically, the paper finds that the nature of such diverse global networks affects the local capabilities and the formation of knowledge linkages at the domestic level. In the light of this finding, we discuss the role of different types of subsidiaries on the generation of technological spillovers in host industrialising countries.

This paper is about the role of MNE subsidiaries in the generation of knowledge and linkages in industrialising countries. It develops an original typology of MNE subsidiaries based on the nature of their global linkages. Then, it explores how this typology is connected with different mental models of MNE’s and discusses the impact of these two aspects on intra-subsidiary innovative activity and the formation of knowledge linkages at the local level – two important dimensions affecting subsidiaries’ capacity to generate knowledge spillovers in host countries. Based on Argentinean data, the empirical analysis suggests that MNE subsidiaries engage in very diverse types of global networking. More specifically, the paper finds that the nature of such diverse global networks affects the local capabilities and the formation of knowledge linkages at the domestic level. In the light of this finding, we discuss the role of different types of subsidiaries on the generation of technological spillovers in host industrialising countries.

Foreign direct investment (FDI) has dominated economic literature, especially the development areas of economics, over the last thirty years, due to the potential effects it has on the economy of a host country; these effects range from influencing the production, employment, income, prices, exports, imports, to affecting the economic growth, balance of