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Technology sourcing versus technology exploitation: an analysis of US foreign direct investment flows

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Author Info
James H. Love
Abstract

The traditional paradigm of foreign direct investment (FDI) suggests that FDI is undertaken principally to exploit some firm-specific advantage in a foreign country which provides a locational advantage to the investor. However, recent theoretical work suggests a model of FDI in which the motivation is not to exploit existing technological advantages in a foreign country, but to access such technology and transfer it from the host economy to the investing multinational corporation via spillover effects. This paper tests the technology sourcing versus technology exploiting hypotheses for a panel of sectoral FDI flows between the United States and major OECD nations over a 15 year period. The research makes use of Patel and Vega's ( Research Policy , 28 , 145-55, 1999) taxonomy of sectors which are likely a priori to exhibit technology sourcing and exploiting behaviour respectively. While there is evidence that FDI flows into the United States are attracted to R&D intensive sectors, very little support is found for the technology sourcing hypothesis either for inward or outward FDI flows. The results suggest that, in aggregate, firm-specific 'ownership' effects remain powerful determinants of FDI flows.

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Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 15 (October)
Pages: 1667-1678
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Handle: RePEc:taf:applec:v:35:y:2003:i:15:p:1667-1678

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Davide Vannoni, 1999. "Entries and Exits in Foreign Markets: Italian Firms' Multinational Expansion in the European Union," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 6(2), pages 181-196, July. [Downloadable!] (restricted)
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  3. Neven, D. & Siotis, G., 1996. "Technology sourcing and FDI in the EC: An empirical evaluation," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 543-560, July. [Downloadable!] (restricted)
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  4. Fosfuri, Andrea & Motta, Massimo, 1999. " Multinationals without Advantages," Scandinavian Journal of Economics, Blackwell Publishing, vol. 101(4), pages 617-30, December. [Downloadable!] (restricted)
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  5. repec:pal:jintbs:v:29:y:1998:i:3:p:445-467 is not listed on IDEAS
  6. Wolfgang Keller, 2001. "The Geography and Channels of Diffusion at the World's Technology Frontier," NBER Working Papers 8150, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Lall, Sanjaya, 1979. "The International Allocation of Research Activity by US Multinationals," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 313-31, November.
  8. Gassmann, Oliver & von Zedtwitz, Maximilian, 1999. "New concepts and trends in international R&D organization," Research Policy, Elsevier, vol. 28(2-3), pages 231-250, March. [Downloadable!] (restricted)
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  1. Richard Harris, 2009. "Spillover and Backward Linkage Effects of FDI: Empirical Evidence for the UK," SERC Discussion Papers 0016, Spatial Economics Research Centre, LSE. [Downloadable!]
  2. Kemegue, F. & Mohan, R., 2009. "US FDI flows to ASEAN-5: Do Geographic Neighbors Matter?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(1). [Downloadable!] (restricted)
    Other versions:
  3. Joel Stiebale & Frank Reize, 2008. "The Impact of FDI on Innovation in Target Firms," Ruhr Economic Papers 0050, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
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