Determinants of knowledge exchange between foreign and domestic enterprises in european post-transition economies

The aim of this paper is to contribute to the literature on internationalised research and development by investigating determinants of knowledge and technology transfer between foreign subsidiaries and the local economy in European post-transition economies. This inquiry leads to a better understanding of determinants that influence this knowledge and technology exchange. Applying a logit model, we find that, in particular, the foreign subsidiary?s corporate governance structure, its embeddedness in the multinational enterprise?s internal knowledge base, its own technological capacity, the growth of the regional knowledge stock and the regional sectoral diversification are all positively associated with the transfer of knowledge. Subsidiaries? investment motives and the relative weight of the sector of investment in the region?s economy appear to be of less importance. The analysis focuses on European post-transition economies, using the example of five selected Central Eastern European countries and East Germany. We exploit a unique dataset, the IWH FDI Micro database, which contains information on one thousand two hundred forty-five foreign subsidiaries in this region. Keywords: foreign direct investment, multinational enterprises, research and development, co-operation, East Germany, Central Eastern Europe