Vertical spillovers from multinational enterprises: Does technological gap matter?

Foreign direct investment (FDI) from Multinational enterprises (MNEs) can augment the productivity of domestic firms insofar as knowledge “spills over” from foreign investors to local producers. The capacity of local companies to exploit knowledge from MNEs can be affected by the technology gap between foreign and local enterprises at both horizontal (in the same industry) and vertical (in different industries) level. Whereas most of the empirical literature has focused exclusively on the analysis of horizontal and backward spillovers (i.e. between MNEs and local suppliers), the present paper also examines the relationship between FDI-related spillovers and technological gap in the Italian manufacturing sector at forward level (i.e. between MNEs and local buyers). Results suggest that at both intra-industry and forward level, the technological gap is of considerable importance for the spillover effect, particularly in the case of low-medium gap

The Impact of R&D Spillovers on Export Value: Does the Transmission Channel matter?

There is overwhelming evidence in the literature that open economies benefit from spillover effects from foreign R&D efforts. These effects increase in particular total factor productivity. Several transmission channels have been detected and studied intensively. Most of them are related to foreign direct investments or international trade. These real economic phenomena are themselves affected by spillovers, either indirectly through their effect on total factor productivity or directly through, for example, increased business contacts between investors, traders and producers.à In this empirical paper we study the effects of R&D spillovers on exports within the OECD. Previous evidence pointed to the crucial role of the transmission channel for such spillovers. Therefore we distinguish between trade-related and foreign-direct-investment related channels and indicators. By doing so we are able to determine the relevance and importance of each of the suggested channels and measures. We control for alternative determinants of export value by extending the well-accepted gravity model for international trade by incorporating R&D spillovers in the standard gravity specification. Our results indicate that – at least at the macro-level – the choice of the transmission channel matters. In particular we find clear evidence that imports are an important transmission channel for technological spillovers, whereas there is only weak evidence in favour of any role for foreign direct investments. Hence these findings simply that openness to trade is a better policy in order to benefit from foreign knowledge than openness to investments.

Recovery and Growth in the Manufacturing Sectors of CEE Transition Economies: Short and Long-Term Efficiency Improving Factors

The first aim of the paper was to explain a cross-sector differences in evolution of gross product of Slovenian manufacturing sectors in the period 1992-98 using different short and long-term factors. Results pointed out great importance of initial conditions (sector orientation to convertible or non-convertible markets, and distorted production structure), as well as structural reforms and macroeconomic and institutional environment. Added long-term factors revealed positive association with short term output growth during the transition period – it is obvious that these factors (FDI, exports, imports of inputs, cooperation) create channels for the transfer of technology, improving the efficiency of production. It turned out also that quality improving exports to the EU countries is significantly positively correlated with the sector output performance. The paper further studies the importance of both direct and indirect means of technology transfer for transition countries and its impact on productivity growth of local firms. Using firm-level data for eight transition countries for the period 1994 - 1998 and employing growth accounting approach, the paper explores the importance of FDI, intra-industry knowledge spillovers from FDI, firm's own R&D accumulation and of international R&D spillovers through trade for firm's TFP growth. Time-invariant firmspecific effects are taken into account using panel data techniques, and potential selection bias for foreign investment decisions is corrected by using a generalized Heckman two-step procedure. After controlling for common economic policy influences and industry effects, our results confirm for five advanced transition countries that technology is being transferred to domestic firms primarily through direct foreign linkages. Evidence on some international R&D spillovers through arm-length trade has been found for four transition countries. Our results also suggest that FDI do not generate positive intra-industry spillovers for domestic firms. Moreover, for three transition countries FDI were found to have significant crowding-out effects for local firms in the same industry.

Is Inter-Firm Labor Mobility a Channel of Knowledge spillovers? Evidence from a Linked Employer-Employee Panel

An employer-employee panel is used to study whether the movement of workers across firms is a channel of unintended diffusion of R&D-generated knowledge. Somewhat surprisingly, hiring workers from others' R&D labs to one's own does not seem to be a significant spillover channel. Hiring workers previously in R&D to one's non-R&D activities, however, boosts both productivity and profitability. This is interpreted as evidence that these workers transmit knowledge that can be readily copied and implemented without much additional R&D effort.Labor Mobility, R&D Spillovers, Profitability, Linked Employer-Employee Data

"The Role of International Technological Spillovers in the Economic Growth of the OECD Countries "

This paper explores the role of imports as a mechanism of transmission of international technological spillovers and the significance of these for the growth and economic convergence of the OECD countries. For this purpose a growth model is estimated that includes amongst its determinants a measure of the stock of technological knowledge. The results reveal first that international technological spillovers transmitted through imports have had a favourable influence on the economic growth of the OECD countries, Secondly, they suggest that the capacity of countries to take advantage of those spillovers depend on their own human and R&D capital endowments..

Spillovers from Foreign Direct Investment in Central and Eastern Europe. An index for measuring a country’s potential to benefit from technology spillovers

In the paper, we construct a composite indicator to estimate the potential of four Central and Eastern European countries (the Czech Republic, Hungary, Poland and Slovakia) to benefit from productivity spillovers from foreign direct investment (FDI) in the manufacturing sector. Such transfers of technology are one of the main benefits of FDI for the host country, and should also be one of the main determinants of FDI incentives offered to investing multinationals by governments, but they are difficult to assess ex ante. For our composite index, we use six components to proxy the main channels and determinants of these spillovers. We have tried several weighting and aggregation methods, and we consider our results robust. According to the analysis of our results, between 2003 and 2007 all four countries were able to increase their potential to benefit from such spillovers, although there are large differences between them. The Czech Republic clearly has the most potential to benefit from productivity spillovers, while Poland has the least. The relative positions of Hungary and Slovakia depend to some extent on the exact weighting and aggregation method of the individual components of the index, but the differences are not large. These conclusions have important implication both the investment strategies of multinationals and government FDI policies

Foreign Direct Investment and Technology Spillovers in the Turkish Manufacturing Industry

Technology spillovers from foreign to domestic firms in emerging economies are considered to be the most important channel through which Foreign Direct Investment (FDI) influence the host economy. Empirical evidence about the existence, magnitude and direction of FDI-related spillovers in these countries is contradictory pointing to the necessity of conducting more econometric studies using firm-level data. We conduct an econometric analysis to assess the impact of FDI-related horizontal technology spillovers on output growth of domestic firms in the Turkish manufacturing industry over 2003-2006. When a broad definition of foreign ownership is adopted, our findings suggest that horizontal spillovers occur from foreign to local firms in the sector of activity. Export-oriented firms do not benefit from these spillovers in contrast to firms producing mainly for the domestic market. However, when foreign ownership is defined according to whether the minority or majority of capital is detained by the foreign partner, horizontal spillovers seem to originate from foreign firms with majority or full foreign ownership while no such effect is associated with minority-owned foreign firms.Foreign Direct Investment (FDI), multinational corporations, foreign ownership, productivity, technology spillovers, knowledge spillovers, horizontal spillovers, Turkey.

Trade, foreign direct investment, and international technology transfer : a survey

The author surveys the literature on trade and foreign direct investment--especially wholly-owned subsidiaries of multinational firms and international joint ventures--as channels for technology transfer. He also discusses licensing and other arm's length channels of technology transfer. He concludes: 1) How trade encourages growth depends on whether knowledge spillover is national or international. Spillover is more likely to be national for developing countries than for industrial countries. 2) Local policy often makes pureforeign direct investment infeasible, so foreign firms choose licensing or joint ventures. The jury is still out on whether licensing or joint ventures lead to more learning by local firms. 3) Policies designed to attract foreign direct investment are proliferating. Several plant-level studies have failed to find positive spillover from foreign direct investment to firms competing directly with subsidiaries of multinationals. (However, these studies treat foreign direct investment as exogenous and assume spillover to be horizontal-when it may be vertical.) All such studies do find the subsidiaries of multinationals to be more productive than domestic firms, so foreign direct investment does result in host countries using resources more effectively. 4) Absorptive capacity in the host country is essential for getting significant benefits from foreign direct investment. Without adequate human capital or investments in research and development, spillover fails to materialize. 5) A country's policy on protection of intellectual property rights affects the type of industry it attracts. Firms for which such rights are crucial (such as pharmaceutical firms) are unlikely to invest directly in countries where such protections are weak, or will not invest in manufacturing and research and development activities. Policy on intellectual property rights also influences whether technology transfer comes through licensing, joint ventures, or the establishment of wholly-owned subsidiaries.Economic Theory&Research,Environmental Economics&Policies,ICT Policy and Strategies,General Technology,Knowledge Economy,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,ICT Policy and Strategies,Economic Theory&Research,General Technology,Environmental Economics&Policies

What are the Channels for Technology Sourcing? Panel Data Evidence from German Companies

Innovation processes within corporations increasingly tap into international technology sources, yet little is known about the relative contribution of different types of innovation channels. We investigate the effectiveness of different types of international technology sourcing activities using survey information on German companies complemented with information from the European Patent Office. German firms with inventors based in the US disproportionately benefit from R&D knowledge located in the US. The positive influence on total factor productivity is larger if the research of the inventors results in co-applications of patents with US companies. Moreover, research cooperation with American suppliers also enables German firms to better tap into US R&D, but cooperation with customers and competitors does not appear to aid technology sourcing. The results suggest that the “brain drain” to the US can have upsides for corporations tapping into American know-how