Does the motivation for foreign direct investment affect productivity spillovers to the domestic sector?

Driffield, Nigel L. and Love, James H. (2006). Does the motivation for foreign direct investment affect productivity spillovers to the domestic sector? Applied Economics Quarterly, 52 (1), pp. 3-28.

Abstract

There is increasing empirical and theoretical evidence that foreign direct investment (FDI) may be motivated not by the desire to exploit some competitive advantage possessed by multinationals, but to access the technology of host economy firms. Using a panel of FDI flows across OECD countries and manufacturing sectors between 1984 and 1995, we test whether these contrasting motivations influence the effects that FDI has on domestic total factor productivity. The distinction between technology-exploiting FDI (TEFDI) and technology-sourcing FDI (TSFDI) is made using R&D intensity differentials between host and source sectors. The hypothesis that the motivation for FDI has an effect on total factor productivity spillovers is supported: TEFDI has a net positive effect, while TSFDI has a net negative effect. These net effects are explained in terms of the offsetting influences of productivity spillovers and market stealing effects induced by incoming multinationals.

Divisions: Aston Business School > Economics finance & entrepreneurship
Aston Business School > Economics finance & entrepreneurship research group
Uncontrolled Keywords: FDI motivation,technology sourcing,productivity spillovers
Published Date: 2006

Download

Full text not available from this repository.

Export / Share Citation


Statistics

Additional statistics for this record