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Foreign direct investment and reverse technology spillovers: The effect on total factor productivity

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  • Edmund Amann
  • Swati Virmani

Abstract

The paper analyses the “feedback effect” of Foreign Direct Investment (FDI) on Total Factor Productivity (TFP) growth in emerging economies via technology spillovers across borders. We study the effect of R–D spillovers resulting from outward FDI flows from 18 emerging economies into 34 OECD countries over the 1990-2010 period, comparing the impact with that of spillovers resulting from inward FDI flows. The result confirms that FDI enhances productivity growth; however the impact is much larger when R-D-intensive developed countries invest in the emerging economies than the other way round. Country-specific bilateral elasticities also support this outcome. JEL classification: F210, F430, F620, O470. Keywords: Outward FDI, Inward FDI, Reverse technology spillovers, Total factor productivity.

Suggested Citation

  • Edmund Amann & Swati Virmani, 2014. "Foreign direct investment and reverse technology spillovers: The effect on total factor productivity," OECD Journal: Economic Studies, OECD Publishing, vol. 2014(1), pages 129-153.
    • Handle: RePEc:oec:ecokac:5jxx56vcxn0n
    DOI: 10.1787/eco_studies-2014-5jxx56vcxn0n
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    Citations

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    Cited by:

    1. Zahra Zamani & Seyed Komail Tayebi, 2022. "Spillover effects of trade and foreign direct investment on economic growth: an implication for sustainable development," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(3), pages 3967-3981, March.
    2. Syed Hasanat Shah & Waqar Ameer, 2021. "The impact of outbound foreign direct investment on export and private investment: Comparative analysis of emerging and developed countries," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 674-692, December.
    3. Paul J.J. Welfens, 2020. "Doubts on the Role of Disturbance Variance in New Keynesian Models and Suggested Refinements," EIIW Discussion paper disbei275, Universitätsbibliothek Wuppertal, University Library.
    4. K. Buysse & D. Essers & E. Vincent, 2018. "Can China avoid the middle-income trap?," Economic Review, National Bank of Belgium, issue i, pages 63-78, June.
    5. Hao Chen & Jiadong Pan & Wen Xiao, 2020. "Chinese Outward Foreign Direct Investment and Industrial Upgrading from the Perspective of Differences among Countries," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(3), pages 1-28, May.
    6. Naveen Rai & Lena Suchanek & Maria Bernier, 2018. "Does Outward Foreign Investment Matter for Canadian Productivity? Evidence from Greenfield Investments," Staff Working Papers 18-31, Bank of Canada.

    More about this item

    Keywords

    outward fdi; inward fdi; reverse technology spillovers; total factor productivity.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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