R&D and Technology Spillovers via FDI: Innovation and Absorptive Capacity

Two faces of R&D (innovation and learning) and technology spillovers from FDI (foreign direct investment) on a firm's productivity growth are examined in this paper. Using firm-level panel data on Czech manufacturing firms between 1995 and 1998, I find that: (i) the learning effect of R&D is far more important than the innovative effect in explaining the productivity growth of a firm, (ii) there is no evidence of technology spillovers to local firms from having a foreign joint venture partner, (iii) positive spillovers from FDI are found in electrical machinery and radio & TV sectors, which are also active investors in innovative R&D.http://deepblue.lib.umich.edu/bitstream/2027.42/39733/3/wp349.pd

R&D and Technology Spillovers via FDI: Innovation and Absorptive Capacity

Two faces of R&D (innovation and learning) and technology spillovers from FDI (foreign direct investment) on a firm's productivity growth are examined in this paper. Using firm-level panel data on Czech manufacturing firms between 1995 and 1998, I find that: (i) the learning effect of R&D is far more important than the innovative effect in explaining the productivity growth of a firm, (ii) there is no evidence of technology spillovers to local firms from having a foreign joint venture partner, (iii) positive spillovers from FDI are found in electrical machinery and radio & TV sectors, which are also active investors in innovative R&D.

On the Role of Absorptive Capacity: FDI Matters to Growth

The paper studies the effects of foreign direct investment (FDI) on economic growth when sufficient provisions of infrastructure is a pre-requisite. In the overlapping generations setting, we show that technology spillovers via FDI take place only when the host country has the sufficient level of infrastructure. Infrastructure has a subsequent positive feedback on further investment which leads the country to grow faster. If infrastructure falls short of the critical level, however, then FDI has little effect on growth as the country is trapped in a low growth equilibrium. We also present the simulations and empirical results based on panel data for 42 developing countries between 1970 and 2000. They support the model that FDI and infrastructure are complementary in affecting per capita GDP growth.http://deepblue.lib.umich.edu/bitstream/2027.42/57225/1/wp845 .pd

The usefulness of private and public information for foreign investment decisions

Using a specially designed survey of Japanese firms planning investments in Asia, the authors emphasize the importance of privately held information in making foreign investment decisions. Information on operating conditions based on direct experience in a country is likely to be the most credible information, but for investors new to a country, information inferred from observing others investing in that country may be more influential. Initially, in fact, observing the actions of competitors seems to lead to cascading investments in that country, apparently through herd behavior (as in China and Vietnam). Countries which do not draw a critical mass of investors are in danger of being bypassed for significant periods. Publicly available information is important in helping shape average perceptions about a country,leading potential investors to view particular locations favorably. Privately held information complements that pubic information, and accounts for important variations in investment plans. Subjective perceptions about policy on foreign direct investments are also important. Policy designed to attract investors -for example, special zones for foreign investors- have been successful in many instances, especially in East Asia, but have also been a waste of scarce investment resources when not appropriately planned. And such policy is of little value in attracting those already investing in a country, or those who already perceive rivals to be active there.International Terrorism&Counterterrorism,Environmental Economics&Policies,Labor Policies,ICT Policy and Strategies,Decentralization,Environmental Economics&Policies,International Terrorism&Counterterrorism,ICT Policy and Strategies,Financial Intermediation,General Technology

Foreign Direct Investment as Technology Transferred: Some Panel Evidence from the Transition Economies

Although the theoretical literature has identified various sizeable benefits from foreign direct investment inflows (FDI), the empirical literature has been unable to establish a positive and significant impact of FDI on the rates of economic growth of host countries. One reason for this difficulty is that theory equates FDI to technology transferred, while in most countries and regions of the world FDI encompasses an array of arrangements that goes well beyond pure technology transfer. This paper tests for the effects of FDI on growth in a set of countries in which FDI is purer technology transferred: the 25 Central and Eastern European and former Soviet Union transition countries between 1990 and 1998. Our main finding is that, in this more appropriate setting, FDI has a positive and significant impact on economic growth as theory predicts.http://deepblue.lib.umich.edu/bitstream/2027.42/39822/3/wp438.pd

Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America

This paper investigates the role of structural reforms ñ privatization, financial reform and trade liberalizationñ as determinants of FDI inflows based on newly constructed dataset on structural reforms for 19 Latin American and 25 Eastern European countries between 1989 and 2004. Our main finding is a strong empirical relationship from reforms to FDI, in particular, from financial liberalization and privatization. These results are robust to different measures of reforms, split samples, and potential endogeneity and omitted variables biases.http://deepblue.lib.umich.edu/bitstream/2027.42/64417/1/wp906.pd

WHY DOES FDI GO WHERE IT GOES? NEW EVIDENCE FROM THE TRANSITION ECONOMIES

This paper examines the importance of agglomeration economies and institutions vis-à-vis initial conditions and factor endowments in explaining the locational choice of foreign investors. Using a unique panel data set for 25 transition economies between 1990 and 1998, we find that the main determinants are institutions, agglomeration and trade openness. We find important differences between the Eastern European and Baltic countries, on the one hand, and the former Soviet Union countries on the other: in the latter group, natural resources and infrastructure matter, while agglomeration matters only for the former group.http://deepblue.lib.umich.edu/bitstream/2027.42/39959/3/wp573.pd

Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America

This paper investigates the role of structural reforms – privatization, financial reform and trade liberalization– as determinants of FDI inflows based on newly constructed dataset on structural reforms for 19 Latin American and 25 Eastern European countries between 1989 and 2004. Our main finding is a strong empirical relationship from reforms to FDI, in particular, from financial liberalization and privatization. These results are robust to different measures of reforms, split samples, and potential endogeneity and omitted variables biases.privatization, financial reform, trade liberalization, foreign direct investment, Latin America, transition economies

On the Role of Absorptive Capacity: FDI Matters to Growth

The paper studies the effects of foreign direct investment (FDI) on economic growth when sufficient provisions of infrastructure is a pre-requisite. In the overlapping generations setting, we show that technology spillovers via FDI take place only when the host country has the sufficient level of infrastructure. Infrastructure has a subsequent positive feedback on further investment which leads the country to grow faster. If infrastructure falls short of the critical level, however, then FDI has little effect on growth as the country is trapped in a lowgrowth equilibrium. We also present the simulations and empirical results based on panel data for 42 developing countries between 1970 and 2000. They support the model that FDI and infrastructure are complementary in affecting per capita GDP growth.foreign direct investment; economic growth, technology diffusion, infrastructure

Foreign Direct Investment as Technology Transferred: Some Panel Evidence from the Transition Economies

Although the theoretical literature has identified various sizeable benefits from foreign direct investment inflows (FDI), the empirical literature has been unable to establish a positive and significant impact of FDI on the rates of economic growth of host countries. One reason for this difficulty is that theory equates FDI to technology transferred, while in most countries and regions of the world FDI encompasses an array of arrangements that goes well beyond pure technology transfer. This paper tests for the effects of FDI on growth in a set of countries in which FDI is purer technology transferred: the 25 Central and Eastern European and former Soviet Union transition countries between 1990 and 1998. Our main finding is that, in this more appropriate setting, FDI has a positive and significant impact on economic growth as theory predicts.Foreign Direct Investment, economic growth, transition economy