Technology Spillover and Absorptive Capacity of Firms and Countries
25 Pages Posted: 2 Sep 2022
Date Written: June 2022
Abstract
We examine the foreign direct investment (FDI) spillover effects in developing countries and investigate the importance of the absorptive capacity of a firm and a country in realizing and facilitating FDI spillover. We use data obtained from the World Bank’s Enterprise Surveys for 107 countries from 2007 to 2020. We find that firms in developing countries do not benefit from horizontal FDI but benefit from forward and backward vertical FDI. We also find that firms can benefit from horizontal, forward, and backward FDI by improving the absorptive capacity of firms and host countries. Based on these findings, we present several recommendations to help firms benefit from FDI spillover.
Keywords: foreign direct investment, technology transfer, absorptive capacity
JEL Classification: D22, F21, O3, R1
Suggested Citation: Suggested Citation