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Assessing the roles that absorptive capacity and economic distance play in the foreign direct investment-productivity growth nexus

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  • Philip Bodman
  • Thanh Le

Abstract

We further examine the channels through which Foreign Direct Investment (FDI) develops the national productivity of host countries. We investigate whether FDI is an effective channel of technological transfer across borders and whether that technology transfer is bi-directional: from an investing country to a host country and vice versa. In particular, an analysis is provided of whether FDI helps channel more resources towards the promotion of education activities and hence augments economic growth indirectly through augmenting the host country's absorptive capacity . Also, the analysis uses a novel approach to take into account the possibility that physical distances can act as a barrier to economic and technological interactions amongst countries, by embedding a measure of geographical distance into two specific channels: international trade and FDI. Empirical results obtained all lend strong support to these hypotheses.

Suggested Citation

  • Philip Bodman & Thanh Le, 2013. "Assessing the roles that absorptive capacity and economic distance play in the foreign direct investment-productivity growth nexus," Applied Economics, Taylor & Francis Journals, vol. 45(8), pages 1027-1039, March.
    • Handle: RePEc:taf:applec:45:y:2013:i:8:p:1027-1039
    DOI: 10.1080/00036846.2011.613789
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    References listed on IDEAS

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    1. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    2. Thanh Le & Philip Bodman, 2011. "Remittances or technological diffusion: which drives domestic gains from brain drain?," Applied Economics, Taylor & Francis Journals, vol. 43(18), pages 2277-2285.
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